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LEARNING ACTIVITY SHEETS IN ORGANIZATION AND MANAGEMENT

THE FIRM AND ITS ENVIRONMENT

LEARNING COMPETENCY WITH CODE

• Differentiate the phases of economic development and its impact to

business environment (ABM_AOM11-Ia-b-3) Quarter 1 WeeK 5

BACKGROUND INFORMATION FOR LEARNERS

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.

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 Rostow’s 5 Stages of growth
Source: https://www.google.com/search?q=picture+of+rostow+five+stages&sxsrf
=ALeKk0288PaufIUzRw6A_LG2oc46olspgw Source:
https://www.google.com/search?q=picture+of+rostow+five+stages&sxsrf
=ALeKk0288PaufIUzRw6A_LG2oc46olspgw: Source:
https://www.google.com/search?q=picture+of+rostow+five+stages&sxsrf
=ALeKk0288PaufIUzRw6A_LG2oc46olspgw:

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

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.

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

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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

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 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 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.

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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
from:https://bizfluent.com/info-7745795-roles-business-organizations-economic-development.html
https://www.managementstudyhq.com/functions-of-management.html
https://www.slideshare.net/LalaineCazar/nature-and-concept-of-management?from_action=save
https://www.wisdomjobs.com/e-university/principles-of-management-and-organisational-behaviour-
tutorial-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

ACTIVITY PROPER

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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Activity 2: Independent Acitivity
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.
Rowstow’s Stages of Growth Influence to Business Environment
1.
2.
3.
4.
5.

A. Guide Questions
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.
I

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.
___________ 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.

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Rubrics (if necessary)
4 Expert – Piece is extraordinary, and very informative and well organized
3 Accomplished – Piece has an interesting style, and somewhat informative and organized.
2 Capable – Piece has little style, gives some new information but poorly organized.
1 Beginner - Piece has no style and, and gives no new information and very poorly
organized

REFLECTION

As a student, what are your insights abouth this lesson?

___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
______________________________.

ANSWER KEY

(Upside down format/flip vertical)

5. false
4. false
3. true
2. true
1.true
vary
True or False Activity 1 and 2 answer may