Unit 7: Socioeconomic Impact Study on Industries and Businesses

Lesson 7.1
Socioeconomic Impacts of Business on Consumers,
Suppliers, and Investors

Contents

Introduction 1

Learning Objectives 2

Let’s Connect 2

Discover 3
Stakeholders 4
Internal Stakeholders 4
External Stakeholders 5
Impact of Businesses on Consumers 5
Consumer Behavior 6
Providing Value to Consumers 6
Connect Emotionally with Consumers 6
Offer Social Responsibility 7
Maintaining Excellent Customer Service 7
Impact of Businesses on Suppliers 7
Price 8
Reliability 8
Stability 8
Capacity 8
Location 9
Impact of Businesses on Investors 9

In Philippine Context 9

Wrap-Up 10

Try This! 10

Challenge Yourself 12

Bibliography 13
Unit 7: Socioeconomic Impact Study on Industries and Businesses

Lesson 7.1
Socioeconomic Impacts of
Business on Consumers, Suppliers,
and Investors

Introduction
The service and industry sectors of the Philippines contribute to about 91% of the country’s
GDP. Despite this overwhelming statistic, the impact of local businesses on society goes
beyond that initial figure. In 2018, these businesses provided about 76% of total
employment in the country, and a significant chunk of the government’s revenue can also
be attributed to taxes related to businesses and their operations.

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Unit 7: Socioeconomic Impact Study on Industries and Businesses
All in all, it cannot be denied that business organizations do have a noticeable impact on
the socioeconomic status of the country, be it on the typical Filipino consumer or the
national government as a whole. However, knowing that they have an impact is one thing.
The real question is how exactly do they impact each sector of society?

Learning Objectives DepEd Learning Competencies

At the end of this lesson, you should be able to:
In this lesson, you should be able to do the ● Identify and explain the various
following: socioeconomic factors affecting business and
industry (ABM_AE12II-e-g-11).
● Identify the different parties
● Analyze and evaluate the viability of a
firms need to keep in mind when business and its impact on the community

making decisions. (ABM_AE12II-e-g-12).

● Formulate recommendations and strategies
● Understand how businesses can on how to minimize and maximize a
impact consumers, suppliers, business’s negative impact and positive

and investors. impact, respectively (ABM_AE12II-e-g-13).

Let’s Connect

The Game of Life 10 minutes

Whenever we make important life decisions, there are almost always people who take an
interest in both the decision and our thought process in coming to it. Sometimes this
interest stems from them being directly affected by the choice. Other times it is because
they may have played a part in you having to make that decision in the first place.

Instructions
1. Look back at the most recent major life decision that you made. This can be your
choice of academic strand for senior high school or some other decision that might
be unique to you.
2. Afterward, consider three people in your life who might have affected your decision.

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Unit 7: Socioeconomic Impact Study on Industries and Businesses
3. Next, consider three people who have been affected by the decision you made.

Guide Questions
1. Did your major life decision not involve anyone apart from yourself?
__________________________________________________________________________________________
__________________________________________________________________________________________
____________________________________________________________________________________

2. Could you have made your decision without taking into consideration the different
people you identified earlier?
__________________________________________________________________________________________
__________________________________________________________________________________________
____________________________________________________________________________________

3. Did any of the people you identified appear in both the lists for steps two and three?
__________________________________________________________________________________________
__________________________________________________________________________________________
____________________________________________________________________________________

Discover
Up to this point, the majority of the discussion on business organizations revolved around
understanding how different internal and external factors can impact a business. We
identified frameworks and models that help guide firms in their decision-making, forcing
them to take into consideration the various elements that may aid or harm the business.
However, a major point that has not been discussed enough is the impact that firms can
have on their different stakeholders. These may include the impact the business can have
on consumers, suppliers, investors, the government, and even other firms and markets
abroad.

How do businesses impact their consumers, suppliers,

and investors?

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Unit 7: Socioeconomic Impact Study on Industries and Businesses

Stakeholders
To preface the discussion of the impact businesses can have on the individuals and
organizations around them, we first need to grasp the concept of stakeholders, as well as
identify the different examples of stakeholders that a firm needs to account for.

Stakeholders are groups or individuals who have an interest in a business organization.

This interest may stem from their ability to affect or be affected by the firm. Stakeholders
can either be internal or external, with internal stakeholders being parties who are directly
or financially part of the organization’s operations. External stakeholders are outside
affected parties who the company takes into consideration when making decisions.

Internal Stakeholders
Employees are individuals hired by the business to assist in completing the necessary tasks
for the conceptualization, production, and sale of their goods and services. They are
compensated for their services through their salary, benefits, and professional
development.

Managers focus on ensuring that day-to-day operations run smoothly, and are often
assigned departments or teams to handle. They often serve as the middlemen between the
executives or owners of a company and the employees who execute their strategies.

The owners or executives are in charge of formulating the initial business idea, whilst also
coordinating the different arms of the firm to form a cohesive unit. Their responsibilities
extend towards overseeing the entire business and ensuring that it succeeds.

The investors of a firm contribute to the financial capital required by business organizations
to operate. These investors do not contribute much else apart from the financial resources
they inject into the firm, and as such are only focused on making a return on that
investment.

External Stakeholders
Customers are external stakeholders who purchase the goods and services produced by

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Unit 7: Socioeconomic Impact Study on Industries and Businesses
the firm. They are the primary targets for the strategies employed by the business. The
support of the customers can greatly impact the success of a business organization. As
such, it is important that firms keep them in mind when making decisions.

Another type of external stakeholder is the supplier. Suppliers provide the raw materials or
inputs required by the firm to produce their goods and services. Whilst not directly related
to the operations and decisions of the business, they still are integral to the firm producing
quality output. The quality of the input provided by suppliers can have a significant impact
on the quality of the final product.

The government refers to the group of individuals who dictate the laws and regulations of
the country in which a business operates. They impact businesses through their different
policies, some of which can benefit the firm or harm their operations.

These are only some examples of the stakeholders that firms must take into consideration.
One thing of note is that not all stakeholders have an interest in a company that is financial
in nature.

Check Your Progress

Provide two examples of external stakeholders that were not
previously mentioned.
________________________________________________________________________
________________________________________________________________________
__________________________________________________________________

Impact of Businesses on Consumers

The primary impact that businesses have on consumers is convincing them to purchase
their goods and services. The ability to encourage spending on their products is a vital skill
that all firms need in order to be successful, as without any support from the market
businesses will not be able to stay afloat.

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Unit 7: Socioeconomic Impact Study on Industries and Businesses

Consumer Behavior
One of the first things firms have to consider is understanding how consumers think or
behave. This understanding is typically achieved through a process called market research,
wherein firms and industries expend resources to collect, analyze, and report data through
the use of surveys, interviews, and observation. The resulting data help provide businesses
with a clearer picture of what their consumers want, giving them a better foundation from
which to make decisions.

While all consumers are unique in their own way, some assumptions that economists make
with regards to understanding consumer behavior include the idea of rationality, wherein
firms assume that all people are rational beings. As such, they are likely to gravitate towards
goods and services they perceive to have the most value. Economists also believe in utility
maximization, which dictates that people will do their best to maximize the satisfaction or
utility that they can gain. Finally, there is also the assumption of the law of diminishing
marginal utility, which states that consumers receive less and less satisfaction from the
repeated consumption of a product.

With a clearer understanding of how consumers behave, as well as information on the

specific characteristics of the target market, firms may resort to different means to influence
them towards patronizing their products.

Providing Value to Consumers

One of the key assumptions of consumer behavior is that they are rational and will always
work towards maximizing their utility. As such, firms might focus on providing the best value
to their consumers at a reasonable price in order to gain their loyalty. If they are able to
provide a better value compared to their competitors, they will be able to sell more of their
goods.

Connect Emotionally with Consumers

A recent trend in marketing is the employment of emotional promotional material in an
effort to connect with customers on a deeper level. Despite the assumption of rationality, in
reality, humans often make decisions not solely based on rational thought, but also on

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Unit 7: Socioeconomic Impact Study on Industries and Businesses
emotions. Firms capitalize on this by utilizing promotional material that latches onto strong
emotions and using them to influence customers towards purchasing their products.

Offer Social Responsibility

Similar to connecting with consumers’ emotions, another approach firms can take is to
provide the market with an opportunity to be socially and environmentally responsible
through the consumption of their products. Consumers who advocate strongly for certain
movements or beliefs may be more inclined to patronize a brand whose goods and services
align with their values.

Maintaining Excellent Customer Service

Some firms might not rely solely on offering the best value or the strongest emotional
connection. Instead, they might look towards providing the best experience both before,
during, and after the sale of the product. Excellent customer service can have a significant
impact on consumer behavior and may convince consumers to offer their loyalty to a brand
in exchange for being treated well and having a hassle-free experience.

Impact of Businesses on Suppliers

Firms can heavily impact the suppliers who provide them with their raw materials or input
necessary to produce their goods and services. The greatest influence that firms can have
on their suppliers is the business that it provides for them. Firms are essentially the
consumers that the sellers of raw materials cater to.

The performance of a firm can have a significant impact on its suppliers. Good sales for a
firm would warrant increased production, thereby also increasing the sales of their
suppliers. On the other hand, a poor year for a firm might force them to cut costs and
reduce output. This would negatively affect their suppliers’ performance as well.

Because of this interdependence, firms focus on establishing good relationships with their
suppliers. This also highlights the importance of choosing the right suppliers when
establishing a firm. Some of the considerations that firms make when choosing their
suppliers include their price, reliability, stability, capacity, and location.

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Unit 7: Socioeconomic Impact Study on Industries and Businesses
Price
The primary factor that determines the viability of a supplier is the price that they are
offering for their raw materials. This is all the more important for newer businesses who
might have limited financial resources, as having relatively low costs opens up a great deal
of flexibility for firms.

It is worth noting that lower prices do not necessarily equate to better value, as there may
be instances wherein the products’ cheap prices are due to poor quality material. Whilst it
might present initially lower costs, the potential consequences of using poor quality input
(ie., refunds, replacements, etc.) might end up hurting more in the long run.

Reliability
Whether or not a supplier is capable of fulfilling orders accurately and on time is also a
major factor in choosing which ones to engage with a business. Their ability to provide the
needed input in a timely manner can significantly impact the firm’s production, as any
unexpected delays may affect the overall sales of a company.

Stability
The stability of a supplier is also an important factor to take into consideration, especially
when dealing with longer-term contracts. Working with a supplier who is not financially or
organizationally stable might pose a number of problems for a firm, as the closure of a
supplier or the need for constant restructuring can impact their ability to fulfill their end of
the agreement. Any missteps on the part of the supplier will affect the performance of the
firm as well.

Capacity
For firms that are producing at a much larger scale , they need to source raw materials from
suppliers who have the capacity to meet their orders. Whilst dealing with smaller suppliers
might open up the opportunity for a closer relationship (which could yield benefits such as
better prices or more flexible terms), issues may arise if they do not have the productive
capacity to meet the needs of their customers.

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Unit 7: Socioeconomic Impact Study on Industries and Businesses
Location
Another factor that all businesses need to keep in mind when establishing relationships with
suppliers is their geographic location. Local suppliers may be better options for quick orders
that require an immediate turnaround while international suppliers may be able to offer
products of higher quality, at the expense of additional shipping fees and lead time.

Impact of Businesses on Investors

The relationship that investors have with the firms that they put their money into is a simple
one: the businesses need the investors to provide them with the financial capital they need
to get the business going, whilst the investor’s main priority is to make a profit from the
initial investment they put into the business. The impact that business organizations can
have on their investors revolves around this relationship.

If the business is successful and able to bring in profits, then it allows investors to walk away
from the venture with more money than they initially gambled with. However, if a business
struggles and is unable to yield a return on the money injected into it by their investors,
then it may cause these investors to leave with much less than what they initially put in.

In Philippine Context
As mentioned earlier, a recent trend in advertisements and promotional material in the
Philippines is the use of emotions to make a deeper impact on viewers. With the typical
Filipino viewer clicking off of online video advertisements after only seven to twelve
seconds, there is a much greater need to engage them within that time period.

Jane Ng, a respected figure in the Philippine Association of National Advertisers (PANA),
recently said that it is the emotion that dictates which advertisements leave an impression
on viewers. It is unsurprising then that more and more companies are focusing on
establishing an emotional connection with their consumers in an effort to evoke feelings
that they will be able to relate to in the goods and services they offer.

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Unit 7: Socioeconomic Impact Study on Industries and Businesses

Wrap-Up
_____________________________________________________________________________________________
● Stakeholders are the different parties that have an interest in the decisions made
by a business. These stakeholders can be categorized as internal or external
stakeholders, and their interests may not be financial in nature.
● The primary impact that businesses have on consumers is their efforts to
influence consumer behavior toward purchasing their products.
● The role that suppliers play in the performance of a firm shows the impact
businesses can have on them as well.
● The relationship that businesses have with their investors revolves around profits.
The main goal of any investor is to yield a return on their initial investment.
_____________________________________________________________________________________________

Try This!
A. True or False. Write true if the statement is correct. Otherwise, write false.

_______________ 1. The primary focus of investors is getting their money back with no loss
or profits.

_______________ 2. Stakeholders are external parties that firms need to keep in mind
when making business decisions.

_______________ 3. The success of suppliers and businesses are interdependent.

_______________ 4. The assumption of utility maximization says that humans are likely to
spend a significant amount for a minor increase in satisfaction.

_______________ 5. Consumers are affected by firms through the different strategies the
latter employs to encourage them to purchase their products.

_______________ 6. Recent trends show that consumers react negatively to appeals to

7.1. Socioeconomic Impacts of Business on Consumers, Suppliers, and Investors 10

Unit 7: Socioeconomic Impact Study on Industries and Businesses

emotion used in advertisements.

_______________ 7. Shareholders cannot also be stakeholders of the same firm.

_______________ 8. The only consideration firms make when choosing their suppliers is
the prices that they are able to offer.

_______________ 9. For someone to be considered a stakeholder, they must have a

financial interest in the business.

_______________ 10. Lower costs do not necessarily mean better value.

B. Identification. Read each of the following situations and identify whether the party in
boldface is an internal or external stakeholder of the business in italics.

_________________ 1. Roy was recently hired to work as a warehouse clerk for AAA
shipping company.

_________________ 2. As a recently opened bakery, JMB’s Baked Goods is looking for more
investors after successfully landing Jay as their first backer.

_________________ 3. Deuce’s Butchery is working hard to fulfill the order put in by the
OOO fast-food chain.

_________________ 4. The VVV Sunday Market is a popular stop for families on the
weekends. The Dominguez clan often spends their afternoons
there.

_________________ 5. Rico is working his way up the ranks to become a division chief in
the LOL department store chain.

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Unit 7: Socioeconomic Impact Study on Industries and Businesses

Challenge Yourself
Short-Response Essay. Answer the following questions in no more than five sentences.

1. Would you argue that influencing the consumers’ behavior is unethical in nature?
__________________________________________________________________________________________
__________________________________________________________________________________________
____________________________________________________________________________________
________________________________________________________________________________________

2. Of the three types of stakeholders tackled so far (consumers, suppliers, and

investors), which of them do you think is most affected by the decisions of a
business?
__________________________________________________________________________________________
__________________________________________________________________________________________
____________________________________________________________________________________
________________________________________________________________________________________

Suggested Rubric for Grading

The rubric below is a suggested one. Your teacher may modify the rubrics based on your
needs. Consult your teacher for the final rubric.

Performance Levels

1 2 3 Suggested
Criteria Score
Beginning Proficient Advanced Weight
Proficiency Proficiency

Correct Did not provide an Provided a partially Gave the correct

Answer
answer or provided a correct answer. answer. ×2
wrong answer.

Use of Minimal or no use of Economic concepts Economic concepts

×2
economic concepts in were used in the were correctly used

7.1. Socioeconomic Impacts of Business on Consumers, Suppliers, and Investors 12

Unit 7: Socioeconomic Impact Study on Industries and Businesses

Economic the answer provided. answer provided with and were relevant to
some errors. the answer.
Concepts

Logical The discussion was The discussion was The discussion was
made with serious done with minor without errors.
Discussion ×2
errors and errors and
inconsistencies. inconsistencies.

Total Possible Score 18

Bibliography
Blink, Jocelyn, and Ian Dorton. “The Foundations of Economics.” Essay. In Economics Course
Companion, 2nd ed., 2–8. Oxford: Oxford University Press, 2011.

Ferrell, O. C., Geoffrey A. Hirt, and Linda Ferrell. Business Foundations: A Changing World. New
York, NY: McGraw-Hill Education, 2020.

Lominé Loykie, Martin Mwenda Muchena, and Robert A. Pierce. Business Management:
Course Companion. Oxford: Oxford University Press, 2014.

Maley, Sean, and Jason Welker. “The Foundations of Economics.” In Economics: Supporting
Every Learner across the IB Continuum, 1–10. Pearson Education, 2011.

Mankiw, N. Gregory. Principles of Economics. Boston, MA: Cengage Learning, 2021.

7.1. Socioeconomic Impacts of Business on Consumers, Suppliers, and Investors 13

 Unit 7: Socioeconomic Impact Study on Industries and Businesses

7.1. Socioeconomic Impacts of Business on Consumers,

Suppliers, and Investors

Let’s Connect
1. Did your major life decision not involve anyone apart from yourself? No.
2. Could you have made your decision without taking into consideration the different
people you identified earlier? No.
3. Did any of the people you identified appear both in the lists for steps two and three?
Answers may vary. Yes, some of the people in my life were both affected by and
had an impact on the decision that I made.

Check Your Progress

1. Provide two examples of external stakeholders that were not previously mentioned.
Answers may vary. One example of an external stakeholder would be the
competitors of the business. Another would be the non-government organizations
(NGOs) that are relevant in the industry.

Try This!
A. True or False. Write true if the statement is correct. Otherwise, write false.

False 1. The primary focus of investors is getting their money back with no loss
or profits.

False 2. Stakeholders are external parties that firms need to keep in mind
when making business decisions.

True 3. The success of suppliers and businesses are interdependent.

False 4. The assumption of utility maximization says that humans are likely to
spend a significant amount for a minor increase in satisfaction.

True 5. Consumers are affected by firms through the different strategies the

7.1. Socioeconomic Impacts of Business on Consumers, Suppliers, and Investors 14

 Unit 7: Socioeconomic Impact Study on Industries and Businesses

latter employs to encourage them to purchase their products.

False 6. Recent trends show that consumers react negatively to appeals to

emotion used in advertisements.

False 7. Shareholders cannot also be stakeholders of the same firm.

False 8. The only consideration firms make when choosing their suppliers is
the prices that they are able to offer.

False 9. For someone to be considered a stakeholder, they must have a

financial interest in the business.

True 10. Lower costs do not necessarily mean better value.

B. Identification. Read each of the following situations and identify whether the party in
bold is an internal or external stakeholder of the business in italics.

Internal 1. Roy was recently hired to work as a warehouse clerk for AAA shipping
company.

Internal 2. As a recently opened bakery, JMB’s Baked Goods is looking for more
investors after successfully landing Jay as their first backer.

External 3. Deuce’s Butchery is working hard to fulfill the order put in by the OOO
fast-food chain.

External 4. The VVV Sunday Market is a popular stop for families on the weekends.
The Dominguez clan often spends their afternoons there.

Internal 5. Rico is working his way up the ranks to become a division chief in the
LOL department store chain.

Challenge Yourself
1. Would you argue that influencing the consumer’s behavior is unethical in nature?

7.1. Socioeconomic Impacts of Business on Consumers, Suppliers, and Investors 15

 Unit 7: Socioeconomic Impact Study on Industries and Businesses

Answers may vary. No, it is not unethical so long as firms are truthful to the
consumers about what their product offers. If there is no lying or deception
involved, then it can be argued that what they are doing is fair.
2. Of the three types of stakeholders tackled so far (consumers, suppliers, and
investors), which of them do you think is most affected by the decisions of a
business?
Answers may vary. Students may choose a different stakeholder. Consumers
are most affected because all the decisions and strategies made by firms typically
revolve around convincing more and more consumers to purchase their goods and
services. Given that they are the main targets, they are also likely to be affected the
most by these firms.

7.1. Socioeconomic Impacts of Business on Consumers, Suppliers, and Investors 16