Role of Business in Economy

The Role of Business in
Economy and the

Different Phases of
Economic Development
Business Drives Economy Growth And Development
Business plays an important role of driving the

economic growth and development of a country.
Business enterprises create new jobs and provide
employment for people. This economy activities
increase people's income to enable them to buy
there essential needs. The society recognizes the
important role of the business sector in fighting
poverty by creating jobs. Companies provide
employment opportunities to people they enable
people to become productive members of the
 By providing people with job opportunities
that lead to increase household incomes, the
business sector helps people to spend for
their housing and health needs. But apart
from this incentives the private sector its
health is directly engaged in providing
professional housing services through the
construction industry. Similarly, private health
institutions provide medical services to
safeguard the health of people. In this
context, business enterprises also play an
important role in providing housing and
health services to people not with standing
the presence of government services.
 The multiplier effect of the private
education leads to significant results in
development. Private educational
institutions provide students with access
the quality education such as through
upgraded learning materials and enhanced
learning strategies. Equipped with ample
resources private educational institutions
can invest in innovative learning strategies,
modern technologies, research discoveries
and development of prototypes for new
products.
 As the business sector increases
people's purchasing power,
individuals get additional options
on where to spend their money.
For instance, having more may
encourage them to indulge and
leisure, fun and recreational
activities. Or they can choose to
invest in business ventures and
produce more goods and services.
Clearly, the business sector opens
door for people to exercise
freedom to choose how they want
to spend their time and money.
Corporate Social Responsibility and the
Triple Bottom Line
 With the presence of multiple stakeholders-such as top management, employees, consumers,
government, and civil society groups-business firms are now becoming more conscious of their
responsibilities to society. This is called corporate social responsibility (CSR).
 There are numerous ways by which Philippine companies practice CSR. Among the CSR practices
commonly found today are the following:
 Giving free medical and dental services to poor communities to improve health
 Cleaning up of clogged waterways and rivers to prevent the incidence of flooding
 Sponsoring spo1ts tournaments such as basketball and marathon events for wellness
 Conducting free training on setting up livelihood projects to augment incomes
 Complying fully with government regulations and standards for business
 Responding to consumers' feedback, such as complaints on products or services
 Using production methods that do not pollute the environment nor harm the health of people

 Another concept related to CSR is the triple bottom BIG IDEA
line, or focus on the so-called 3 Ps- profit, people, CSR is nurtured by a corporate culture that
and planet (see figure 5.5). Traditionally, managers rewards responsible thinking , social
focus on improving the company's financial involvement , and ethical behavior.
condition by looking at the accounting "bottom
line" or the net profit figures found at the bottom of
income statements . But with the business challenge
to be more responsive to society's needs, managers
are increasingly becoming more aware not only to
consider the firm s economic performance, but also
the social benefits and the environmental impacts of
their company. The triple bottom line ensures a
balance among different concerns of people. It
emphasizes looking after the needs of various
stakeholders which comprise the top management,
shareholders, employees, consumers, government
regulators and, the general public.
Different Phases of Economic Development
 A better understanding of how economies are

developed helps to guide managers on the type of Agriculture
strategy to adopt for their businesses. The
invisible hand theory contends that economic
development is brought by the influence of
individuals who produce goods and services for Industrializatio
their personal gain and profit. This implies that n
economic development happens in a natural way
due to the actions of influential individuals.
Development economists pointed to consistent
structural patterns in the phases of economic
development as described in these pictures.
Developing Economies Phase:
Reliance on Agriculture as the
Primary Sector
 Development economists believe that in the early
phase of economic development, the agriculture sector
typically plays a dominant role in the economy,
compared to other sectors such as the industry
(manufacturing) and the service sectors. Gradually, the
improvement and the transformation of the agricultural
sector (for instance, the shifting to high value crops)
lead to higher productivity and increased incomes for
people.
Industrialization Phase: Decline in Agriculture and Shift
to the Industry Sector
 According to development economists, economic transformation

occurs with a decline in share of agriculture to the economy,
and the accompanying shift to industry sector. Industry is broadly
defined to include the manufacturing, mining, construction,
electricity, gas, and water sectors. The "modern" economy
develops with the growth of industrialization. The transition from
"traditional" to "modern" economy is characterized by the
following factors: (1) increased consumer demand, (2) increased
incomes, (3) growth in the labor force, (4) accumulation of
capital, and (5) introduction of new technologies.
Globalization Phase: Interdependence among Countries and
Worldwide Competition
 What we are experiencing at present is the global economy.
This is characterized by worldwide business competition and Big idea
the wide scope for markets and supply of resources that go The state of the global
beyond national borders. Globalization pertains to the economy affects work
increasing interdependence among countries for accelerated force productivity. For
instance, a global
economic activities. For instance, when you examine the
economic recession will
parts that compose your cell phone gadget, you may notice definitely slow down
that it has been manufactured and assembled with parts and productivity rates of the
materials sourced from different countries. In fact, you might labor force in many
have noticed that even the fruits that you eat these days are countries.
from a foreign country (e.g., apple, oranges, and grapes).
Today, we find global managers who manage businesses that
operate in more than one country.
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Role of Business in Economy

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The Role of Business in

Economy and the

Business plays an important role of driving the

 A better understanding of how economies are

 According to development economists, economic transformation

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