MODULE 1
THE WORLD OF BUSINESS
The world of
business is an exciting one. A person needs only to indulge in it to find out that there indeed are great rewards to be gotten
from it. This module will help give you some basics on what business is and what business is like in the Philippines.
OBJECTIVES:
After
studying this module, the student should be able to:
1. Discuss the development
of business culture.
2. Identify the different
kinds of business.
3. Discuss why people
go into business.
DEVELOPMENT OF OUR BUSINESS CULTURE
People have engaged in business activities since the earliest beginning of community existence.
When early man produced more of a crop or caught more game animals or fish than he could consume and bartered the excess for
something produced or caught by a neighbor, he was engaged in business activity.
From its simple beginnings even before recorded history, business grew and proliferated, because
increasingly complex and comprehensive, until it came to dominate the overall culture of human society.
Business was already highly developed in the ancient world. Recent discoveries revealed business
transactions written on clay tablets that are around 6,000 years old. The Code of Hammurabi, promulgated around 2,000 BC had
provisions governing commercial transactions. Devices of business control like accounting and business functions like insurance
and banking date back to the Middle Ages.
Business is equally ancient in the Philippines. It also reaches back into prehistoric times.
Historians have shown that the Philippines lies at the crossroads of ancient trade and migration.
As early as the ninth century, Arab traders were already visiting the islands. By the twelfth century, Chinese traders took
over most of the Philippine trade and even established trading communities in the Philippines.
The Galleon Trade was the trade between manila and Acapulco in Mexico which was carried on mostly
during the 18th century. The Spanish community in Manila tried to accumulate fortunes by speculating on the annual
trip of the galleon to Acapulco and back.
Business in the Philippines and in other countries of the free world is basically capitalistic
in nature. This means that society entrusts the workings of the business process to the guidance of the private businessman.
Business is capitalistic if we have:
1. Private
ownership of non-personal means of production. Land, industrial plants, equipment, factories, transportation facilities, and
other capital goods or at least the larger part of the community’s capital goods are owned by individual persons or
by private corporations and not the state.
2. Production
for private account. This means that private initiative gives rise to production, essential for private profit. The earnings
from business go to private individuals or groups.
3. Voluntary
savings and institution of bank credit.
In every economy, certain basic functions have to be accomplished—the determination of what,
how, how much and for whom to produce, the allocation of the goods and services produced, further growth of the economy, the
distribution of economic benefits and maintenance of relations with other countries.
In a capitalist economy, otherwise known as the market economy, prices serve as indicators between
the consumers and the producers. The market evolved as a result of the exchange between buyers and sellers which consequently
led to the establishment of prices. The forces of supply and demand are allowed to operate with the decisions taken by buyers
and sellers coordinated by movement in prices. Hence if buyers wish to purchase more than the sellers wish to sell or can
supply, prices will rise. As prices increase, buyers tend to reduce their purchases while sellers increase the quantities
they wish to sell. Similarly, if sellers wish to sell more than what buyers are prepared to buy, prices fall causing sellers
to decrease quantity sold and buyers to increase the quantity they wish to buy.
The private owner’s objective in engaging in business activities is the earning of a handsome
profit as a result of the use of his productive assets. The motivation for profit serves as the greatest incentive for economic
drive on the part of the owners of resources. Capitalism works along these lines although an ideal market economy could hardly
be achieved due to the presence of many market imperfections with result to some problems in resource allocation.
In the Philippines, just like in any other nation, the so-called market economy does not operate
in perfect situations since we can still observe the presence of economic inequalities. The resources of production are concentrated
in the hands of few and the difference in purchasing power of individuals sometimes lend to distortions in coping with the
basic economic functions of what, how, how much, and for whom to produce. The private owner’s objective to earn the
highest profit which serves as his motivating factors in production can lead to the production to luxury items affordable
by few individuals but which can result in the exclusion of the needs of the masses.
Hence, in the Philippines, government regulations and interventions in the operation of the capitalistic
economy are necessitated so as to meet the needs of consumers having lower purchasing power, and to promote the welfare of
the majority as a whole.
KINDS OF BUSINESS
The extent and nature of business activities are almost as diverse and comprehensive as the totality
of the socials and economic interest of man. WR Spreigel classifies business activities into three broad groups: Commerce,
Industry and Service.
Commerce
Commerce refers to the transfer or exchange of goods and services with the movement of goods from
pint of production to point of consumption. It covers buying, selling, and marketing and merchandising, which are directly
involved in the transfer of goods. Under commerce are also other activities which indirectly concern the transfer of goods
like collecting of goods, grading, warehousing, transportation, insurance and the financing of transfers.
Sometimes, trading business are set apart as a class but in a broad sense, trade is part of commerce.
Trade may be either retail or wholesale,
domestic or foreign.
The retail business is represented by a sari-sari store, a grocery department store. Wholesalers
buy and maintain stocks of merchandise for distribution to retailers or to institutional, commercial, or industrial users,
but not in significant amounts to ultimate consumers.
Under commerce, we also include a host of activities that have grown around the actual transfer
of goods. The collecting of goods, their grading, warehousing, transportation, insurance and the financing of the transfer
are subjects of business in themselves.
Industry
Industry is primarily concerned with the creation of form utility or the production of goods that
are used either by the consumer and are, therefore, called consumer’s goods
or by other industries in the further production of other goods and, therefore, called producer’s
goods.
The broad grouping of industry is further subdivided into genetic, extractive, manufacturing, and
construction industries.
Genetic industries derived from the word “genesis” or beginning, include agriculture, forestry and fish culture.
Extractive industries include mining, lumbering, hunting and fishing. They are characterized by the extraction of goods from natural resources.
Manufacturing industries are involved in the changing of raw materials of secondary products into more useful forms. The change from a basic
to a more advanced form may be physical or it may be chemical.
Manufacturing industries include food, beverage, tobacco, textiles, footwear and wearing apparel,
paper and paper products, printing, leather, rubber, chemical, machinery, electrical appliances, transportation equipment,
and hundreds of other industries manufacturing other goods or products.
Construction industries may range from the building of multi-million peso highways, airports, and multi-story buildings to the more humble
dwellings and residences were we live.
Services
Services are the third broad classification of business. These enterprises cater to personal needs
of people, or with the rendering of a personal service. Businesses engaged in service are not involved in the buying and selling
of goods or the manufacture of products.
Recreation services include motion picture production and distribution, theaters for drama and stage presentations, television and the
like.
Personal services include such businesses as restaurants, hotels, lodging houses, laundry shops, beauty parlors, barber shops, portrait
and photographic studies, and refreshment parlors.
These broad classifications, though, are not mutually exclusive. Certain businesses do not fall
clearly into one classification or another but may overlap into two or three groups. Thus transportation and communication
may be classified as commerce if the yare essentially intended to transfer goods. But a passenger bus or a home telephone
system would be performing service. Similarly, banks, financial institutions, and insurance companies may deal in both commerce
and industry or even services.
WHY PEOPLE GO INTO BUSINESS
People go into business for a variety of reasons. They may go into business as owners and employers
or as an employee. The decision to go into business and not into some other activity as the priesthood or medicine or law,
may be the result of conscious thought and deliberate preparation over a period of years. Or it may be due to the fact that
a person finds no easier or more satisfactory way or earning a living.
Whether a person goes into business as employer or an employee, he faces the hazards of loss and
other problems inherent in the conduct of business. Both owner and the employee need essentially the same personal characteristics
that are required to succeed. Both also enjoy certain values which are derived when people go into business. These values
are:
Social Approval
The businessman has a high social standing in the community. It used to be that society looked
with greater favor upon the soldier, the landlord, the priest or the doctor. Early businessmen were looked upon as second
class citizens who belonged to a lower social stratum.
Profit
The major factor of motivation for going into business is profit. Individuals enter into these
activities because of the anticipation of a reward for their toiling in the form of monetary benefits. Aside from this, returns
must be realized by their productive assets so as to maintain a satisfactory level of productive operations.
Service to the Community and to Employees
While profit is an important value, it is not an overriding one. There is a maxim in business which
states that “he profits most who serves best.” Many businessmen render service to the community in donating money,
sponsoring civic activities, setting up facilities for community needs, or providing opportunities for employment.
Service is likewise given not only to the community but to the employees as well. Industrial relations
as a function of business has expanded into various activities intended for the wellbeing of employees.
Personal Satisfaction
This personal satisfaction comes about from the social status conferred on those engaged in business.
It also arises from the many opportunities given the businessmen to satisfy his creative urge, his desire to witness the concrete
fruits of his endeavors, and his search for self-fulfillment in what he feels is useful activity. Business is not only a means
to provide livelihood but a way of life and a pattern of existence as well.
Livelihood
People go into business to earn a living. The pervasive influence of business in human activity
is such that very often the only avenue where one could enter in the hopes of earning a living is to work for commercial,
industrial, or service establishment.
Power
Some people enter business because they expect to rise up to positions of prestige, power and leadership.
The successful businessman whether employer or manager-employee wields power in the community, exercise influence with the
money or productive facilities under his control, and commands authority over the subordinates working under him. The desire
for power is a craving that is human enough and is often fulfilled in a successful business.
Questions to Answer:
Kindly
answer the following questions:
1. Recent
discoveries revealed business transactions written on clay tablets that are around _______ years old.
2. Business
in the Philippines and in other countries of the free world is basically capitalistic in nature. Explain.
3. What
three characteristics must be present in order for business to be classified as capitalistic?
4. The
capitalist economy is otherwise known as the ___________ _______________.
5. What
are the three kinds of business? Explain each.
6. What
values are derived by people when they go into business? Enumerate and explain each.
