MODULE 4

In this module you can now analyze the problems and challenges facing less-
developed countries and begin to understand why some countries have been able to
go through process of economic and human development.
This module is mainly focused on one lesson specifically:

Lesson 4: Phases of Economic Development

Learning Competency:
• Analyze the forms and economic roles of business organizations
• Differentiate the phase of economic development of its impact to business
environment
(LC Code: ABM_AOM11-Ic-d-8)

At the end of this lessons, you are expected to:

1. explain the role of business in relation to the economy;

2. discuss the different phases of economic development; and

3. understand the impact of economics to business environment.

Lesson
Phases of Economic Development
4

PHASES OF ECONOMIC DEVELOPMENT

Economic development is a total process which includes not only economic
growth or in the increase in the amount of goods and services produced by the
country’s economy but also consider the socio-cultural, political, and spiritual
aspect aspects of the country’s growth.

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 Although material wealth accumulation is among
the concerns of genuine economic development. Its
greater concern is the total improvement of the quality of
people’s lives. This, in turn is related to sustainable
economic development issues in a country which greatly
influences business management.
Sustainable economic development ensures that
the present needs of a particular generations to also fully
met without endangering the ability of future generations
to also meet their own needs fully.
Business managers must be conscious of their
decision s to avoid the abuse of ecological elements- air,
water, and soil -as this will threaten sustainable
economic development.

Economic development phases/stages in a particular country includes

economic growth, improvement of human development index, availability of
benefits provided by science and technology, societal improvement of the
opportunities, and general welfare of its members.
Economic growth means increase in the given amount of goods and
services produced by the country’s earnings.
Human development index is a measure of country’s socio-economic
development based on data regarding life expectancy, at birth, educational
attainment, literacy, and adjusted real income per capita.

PHASES OF ECONOMIC DEVELOPMENT

The transition of economic development from one phase to another is
usually gradual, and a country may find itself under economic phases at different
point s of time.
Economic development is only possible if a country has maximized the used
of its human and natural resources. Since these resources differ greatly in quality
and quantity, some countries, experience drastic development.

CRITERIA IN CLASSIFYING PHASES OF ECONOMIC DEVELOPMENT

A. Means of livelihood B. Extent of Economic C. Medium of Exchange

Activity
1.Hunting and fishing Phase – our 1. Household economy- The 1. Barter Economy – during
ancestors obtained food by needs of the family were primitive era, exchange was done
hunting and fishing taken directly satisfied largely by the efforts through barter with was the
from the mountains, seas and the and contributions of all the direct exchange of goods for
bounties of nature family members. goods, services to services or
services for goods.
2.Pastoral Phase – the creation of 2. Village Economy- When 2. Money Economy- Through
groups and the presence of a large several families organize a time and evolution, money was
number of livestock have made village, economic and social used, as a medium of exchange.
man settle in an area for a longer relations spread among the Consequently, a monetary system
period of time. various families. evolved.

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3.Handicraft Phase- Items are 3. National Economy- this 3. Money and Credit Economy-
made by skilled and trained phase involves the grouping of When transactions continued to
manual laborers. They made village into bigger and broader increase in volume and
excellence workmanship of social Units. It develops frequency, it became imperative
sculpture, jewelry, furniture economic activities on a to allow others to purchase one’s
porcelain and other wares. nationwide scale. good or engage one’s services
With payments to be paid at
some future date.
4.Agricultural Phase- Man’s need 4. International Economy-
continuous supply of food led to with better and modern
the development of agriculture means of transportation and
and the concept of land communication, a country
ownership. Man begin to work as expands its economic
farmer and fisherman. relationship through
international trade and
diplomatic cooperation.
5.Industrial Phase- the presence of
manufacturing companies in the
certain areas of Metro Manila
It was the period when
machineries were used in factories
and industrial plants.

All countries have economic problems. We have economic problems

because of our resources, money, materials, and machines are limited while
our human needs are unlimited. The unfair distribution of productive
resources and population explosions have created more economic problems.
Some of economic problems to address are income poverty, hunger, disease,
lack of adequate shelter, and exclusion, while promoting gender equality,
education, and environmental stability.
The National Economic and Development Authority (NEDA) has laid out the
Philippine Development Plan (PDP) 2011-2016 which “adopts a framework, which
is high growth that is sustained generates mass employment and reduces poverty.”
The PDP is focused on the following areas:

1. Pursuit of Inclusive Growth

2. Macroeconomic Policy
3. Competitive Industry and Services Sectors
4. Competitive and sustainable Agriculture and Fisheries Sector
5. Accelerating Infrastructure Development
6. Resilient and Inclusive Financial Sector
7. Good Governance and Rule of Law
8. Social Development
9. Peace and Security
10. Conservation, Protection, and Rehabilitation of the Environment and Natural
Resources
It is evidently from the PDP focused areas as they cover not only in economic
and industrial goals of the Philippines but also social, environmental, and peace
and security aspects.

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 FORMS OF BUSINESS ORGANIZATION
Basically, the role of business is to produce goods and services which
consumer needs, therefore business has relationship with the economy.
The business firm produces goods and services from the factors of
production provided by society. Consumer, in turn buy these goods and services.
Business firm thus contribute to the country’s economic growth.
One measure of economic growth is the Gross National Product (GNP)
defined as the total market value of goods and services produced by a country in
any given period.
A business enterprise is part of larger economic system. Other groups and
individuals affect the way business is managed. They are the owners of the
business, employees working for the enterprise, customers buying the goods and
services selling machinery, equipment, or materials to the enterprise.
The responsibility of a business to the community is a general one. The
business should strive to promote the social, economic, and cultural welfare of the
community.
Kinds of Business

1. INDUSTRIES – involved the conversion of raw materials into finished

products or goods and the application of labor upon raw materials so that
the greater usefulness becomes possible after the process.
Manufacturing industries use materials and supplies turned out by the
extractive industries and changed these raw materials into various articles of
materials for production of goods and new products.
Examples: Nokia, Honda, Sony, San Miguel Corp., Shell, Purefoods, etc.

2. COMMERCE – Involves the process of buying and selling where goods are
moved from point of production to the point of consumption.
Examples: Shoe Mart, National Bookstores, Webster, Robinsons Department
Store
3. SERVICE ENTERPRISE- are primarily concerned with the satisfaction of the
needs and wants of the customers.
a. Public and community services
Examples: MERALCO, transportation companies, news paper publisher

21
 b. Professional and trade services
Examples: repair shops, building contractor, law offices
c. Recreation services
Examples: TV stations, theaters, movie productions
d. Personal services
Examples: restaurants, schools, beauty parlors

Forms of Business Organization – may depend on its purpose, nature of

operations and resources. However, a business organization’s firm may change
with the changing times and the demands they present.

CHANGING FORMS OF BUSINESS ORGANIZATIONS

1. Simple business organizations – is an organization with few departments,
centralized authority with wide span of control, and with few formal rules and
regulations.

2.Functional business organizations – group together people with similar or

related duties, practices delegation of authority to functional managers like the
personnel managers, sales managers or financial managers but allow CEOs to
retain authority for strategic decisions.
3.Divisional business organizations – are made up semi-autonomous, separate
business units, with a division head responsible for his or her unit’s performance.
4.Profit business organization-are organizations designed for the purpose of
achieving their goals and achieving stability through income generation and profit-
making.
5.Non-profit organizations are organizations designed to give service to clients
without expecting monetary gains or financial benefits for their endeavors.
6.Open/Flexible business organizations are formed to meet today’s changing
work environment. They include team structures, matrix business organizations,
project business structures, boundaryless business organizations, and virtual
business organizations.

Other basic forms of business that are legal in the Philippines are:
These are forms of business organizations according to ownership

1.Single Proprietorship- a form of business ownership organized and managed by

only one person.
2.Partnership-a business organization where to or more persons contribute
money, property, or talent, to carry on a business.
3. Corporation- is an artificial being created by the operation of law, having the
rights of succession and the powers, attributes and properties expressly authorized
by law or incident to its existence.
4. Cooperative - is a private business owned and operated by the same people that
use its products and or services. The purpose of a cooperative is to fulfill the needs
of the people running it.

22
 Different organizations have different preference s as to business form that is
appropriate for their needs and the purpose of their existence.
Managers, therefore, must be creative in finding ways to structure or design
and organize work in their respective firms.

Activity: Directions: Modified TRUE Or FALSE. If the statement is TRUE write O.

If the statement is FALSE write X. Write your answer in a separate sheet of paper.
________1. In any business, whether large or small there must be grouping of
activities.
________2. Service enterprise involves the conversion of raw materials into finished
products.
________3. Man is common element in an organization.
________4. Economic development has a greater concern to improve the quality of
peoples live.
________5. Any unlawful activity like gambling, smuggling can be considered
business.
________6. The success of business directly affects the world’s economy.
________7. We have economic problems because human needs are unlimited while
our resources are limited only.
________8. Profit is the main objectives of the business which distinguishes from
charitable institution.
________9. The role of the government is to provide necessary policies and
infrastructures to speed up the growth of the economy.
_______10. The manager should conceptualize the nature of the business and is in
better position to introduce innovations for business success.

Directions: Identify five businesses in your area. Write about their

contributions (at least three) to the economic growth of your area. Do this in a
separate sheet of paper.
Name of Business: ____________________________________________
Contributions:
1.
2.
3
Name of Business: _____________________________________________
Contributions:
1.
2.
3.

23
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