Module No.

1: THE ROLE OF BUSINESS IN SOCIAL AND

ECONOMIC DEVELOPMENT
Overview/Introduction
This module introduces the students to business ethics; the natures and forms of business organizations;
core principles of fairness, accountability and transparency; and code of conduct and ethical standard in the
organization. The students will learn the important role of business in social and economic development which will
make them realize that every decision the business undertakes should be towards the development of society.
LEARNING OUTCOMES
The students in the long run and on their own will be able to enhance their ethical awareness and
sensitivity, promoting moral development, and appreciation of and skill handling complex ethical decision making in
the establishment of their own business and create jobs that can help the community as God’s people.

TARGET COMPETENCIES

1. differentiate the forms of business organizations. DepEd_ABM_ESR12-IIIa-d-1.1

2. differentiate the forms of business organizations in terms of their purpose and role in socio-economic
development DepEd_ABM_ESR12- IIIa-d-1.3

LEARNING OBJECTIVES

In these lessons, you will be able to do the following:

1. explain the meaning and concept of business ethics;

2. differentiates the different types and forms of business organization;
3. analyze the role of business organization in the socioeconomic development;
4. illustrate the role of business organization in the economy;
5. write a research paper on the impact of the Covid-19 pandemic on business organization and its implication
on the socioeconomic development.

KEY WORDS AND CONCEPTS:

Business Ethics - relates to the rules, standards, and moral principles regarding what is right and what is
wrong in a specific situation.
Corporation - an entity created by law that is separate and distinct from its owners and its continued
existence is dependent upon the corporate statutes of the state in which it is incorporated.
Ethics - the rules or guidelines that establish what conduct is right or wrong for individuals of group
Partnership – a business organization in which two or more individuals come together, contributes
resources to form a business, and agree to dive the profit among themselves.
Principles - moral rule or standard of good behavior or fair dealing.
Sole Proprietorship - business owned and operated by a single individual is call sole proprietorship.
Values are individual, culture or organization belief of what is right and wrong.

ASSIGNED READING/S:
What is ethics? - https://www.scu.edu/ethics/ethics-resources/ethical-decision-making/what-is-ethics/
https://learn.canvas.net/courses/1399/pages/lecture-1-dot-2-what-is-ethics
What is business ethics? https://www.youtube.com/watch?v=_sF1CEA-UUs
Roles of business in the society: https://smallbusinessify.com/why-is-business-important-to-society/
CONTENT FOCUS
LESSON 1: INTRODUCTION TO BUSINESS ETHICS

Business is a part of society. It works together with every human being and acts like a distinct entity. It is
complex and dynamic interaction among the people and the institutions. Its activities must be observed and viewed
to see their points as a major factor in our society. That is why business must be observed by their ethics because
these two cannot be separated from each other. A business without good ethics can destroy the interactions and
relationships of people to institution and vice versa.

Studying Business Ethics can help us identify ethical issues when they arise and recognize the approaches
available for resolving them. We will also learn more about the ethical decision-making process and about ways to
promote ethical behavior within the organization. By studying business ethics, we may begin to understand how to
cope with conflict between our own personal values and those of the organization in which we belong.

Business Ethics Defined

Ethics refers to the rules or guidelines that establish what conduct is right or wrong for individuals of group.
While, business ethic relates to the rules, standards, and moral principles regarding what is right and what is wrong
in a specific situation. It is made up of principles, values, and standard that guide behavior in the world of business
(Fraedrich, et.al.,2012). Values are individual, culture or organization belief of what is right and wrong. It motivates
people to act one way or another and serve as a guide for human behavior.

Other definition of business ethics according to Roa (2011).

1. BUSINESS ETHICS is the study of what is the right and wrong human behavior and conduct in business.
2. BUSINESS ETHICS is a study of perceptions of people about morality, moral norms, moral rules, and
ethical principles as they apply to peoples and institutions in business.
3. BUSINESS ETHICS is the study, evaluation, analysis and questioning of ethical standards, policies, moral
norms, and ethical theories that managers and decision makers use in resolving moral issues and ethical
dilemmas affecting business.

Learn more about business ethics in this website https://www.thestreet.com/personal-finance/what-is-business-

ethics-15026364

Benefits of Business Ethics

1. Ethics Contribute to Employee Commitment. The more a company is dedicated to taking care of its
employees, the more likely it is that the employees will take care of the organization. Because employees
spend a considerate amount of their time at work, a commitment by the organization to goodwill and
respect for its employees usually result increase the employees’ loyalty to the organization and their
support of its objectives.
2. Ethics Contribute to Investor Loyalty. Ethical conduct results in shareholders loyalty and can contribute to
success that supports even broader social causes and concerns. Investor today are increasingly
concerned about the ethics, social responsibility, and reputation of companies in which they invest, and
various socially responsible mutual funds and asset management firms can help investors purchase stock
in ethical companies.
3. Ethics Contribute to Customer Satisfaction. Customer satisfaction is one of the most important factors in
successful business strategy. By focusing on customer satisfaction, a company continually deepens the
customer’s dependence on the company, and as the customer’s confidence grows, the firm gains a better
understanding of how to serve the customer so the relationship may endure.
4. Ethics Contributes to Profits. Reputation of the company and its share prices also increase if the company
acts upon Corporate Social Responsibility (CSR). Study shows that, even using a variety of measurement
methods, companies actively engaging in CSR have higher pre-tax income than firms that are merely
focused on financial performance; therefore, ambitions and performance are not in conflict with being
ethical.
 Please watch the video in the link below to know more about business ethics. https://www.youtube.com/watch?
v=EK1ak9lXLo8

LESSON 2: FORMS AND PURPOSE OF BUSINESS ORGANIZATION

BUSINESS DEFINED

Business is defined as an activity that is part and parcel of human society: it is an entity in which economic
resources or inputs, such as materials and labors, are put together and processed to provide goods or services or
outputs to customers (Racelis, 2017). Business may be the undertaking of a person or a group of people investing
money, property, or skills with a primary goal of gaining profit and rendering service to our society. Without
business, there is no transaction or trading today. Business creates a good interaction between men to institution
and institution to men. The business is always referred or connected with anything that is something to do with the
economy because of the cycle of money through the industries and enterprises to consumers to government
continuously going back again.

3 TYPES OF BUSINESS ORGANIZATION

1. Service -provides services rather than products to customers. They include hotels,
hairdressers, and repair shop to name a few.

2. Merchandising - sell products they purchase from other businesses to customers. They
includes department store, convenient store, specialty shops.

3. Manufacturing - change basic inputs into products that are sold to customers. Using
resources and supplies they create everything from automobiles to paper.

FORMS OF BUSINESS ORGANIZATION

A business can be organized in one of several ways, and form its owners choose will affect the company’s
and owners’ legal liability and income tax treatment. Here we will discuss the most common forms of business
organization and its chief characteristics.

A. Sole Proprietorship

A business owned and operated by a single individual is called sole proprietorship.

The proprietor owns all the assets of the business and the profits generated by it. He/she is assumes
complete responsibility for any gains and losses of the business. In addition, the owner has the complete power
over all business decisions hence; he/she is working for himself/herself.

Advantages

1. Easy and convenient to form

2. No profit sharing
3. Unlimited control by the owner
4. Minimum legal requirement
5. Complete power over business decisions

Disadvantages

1. Unlimited liabilities
2. Limitation on size (and thus on fund –raising power)
3. Limited by management’s ability to be jack-of-all-trades.
B. Partnership

When two or more individuals come together, contributes resources to form a business, and agree to dive
the profit among them, a partnership is formed. An architectural firms and law firms are good examples of
partnership organization.

Chief characteristics

a) Association of individuals
b) Mutual agency
c) Limited life
d) Unlimited liability
e) Co-ownership property

Advantages

1. Ease of forming the organization

2. Additional and collective resources
3. Burden of work is shared among partners

Disadvantage
1. Unlimited liabilities
2. Profit sharing
3. Limited life
4. Transferability is difficult

C. Corporation

A corporation is an entity created by law that is separate and distinct from its owners and its continued
existence is dependent upon the corporate statutes of the state in which it is incorporated.

Characteristics

a) The corporation has separate legal existence from its owners

b) The stockholders have limited liability.
c) Transferable ownership rights (owner is in share of stocks)
d) Ability to obtain capital (relative ease)
e) The corporation is subject to numerous government regulations.
f) The corporation must pay an income tax on its earnings, and the stockholders are required to pay taxes on
the dividends they receive: the result is double taxation of distributed earnings
g) An artificial/juridical “person” endowed with ability for self-management, that is, the management structure
is at the discretion of the board of directors.

Advantages

1. Capacity to hold property and exist as a legal unit or distinct entity

2. Exemptions of shareholders from individual liability
3. Continuity of existence despite death or changes in shareholders
4. Transferability of shares
5. Centralized methods for the protection of shareholders and creditors

Disadvantages

1. Costly to incorporate
2. Possibility of takeovers by oppositions
3. Minority stockholders have little power over the majority stockholders.
4. Subject to government restrictions and controls
ROLES OF BUSINESS ORGANIZATION IN SOCIETY

Business plays a big part in the development of society. In fact, society cannot exist without business.
Business exists to provide the basic and secondary need of consumers. Firms produce goods and services from
the factors of production provided by society. Subsequently, consumers buy these goods and services, therefor,
contributing to the society and economic development of the country.

The roles of each forms and types of business organization in the society are the following:

▪ Supplying goods and services that customer cannot, or do not want to, produce themselves
▪ Create jobs for customers, suppliers, distributors and coworkers. These people make money to support
themselves and their families, pays taxes and use wages to buy goods and services
▪ Pay taxes to the government
▪ Continually developing new goods, services and process
▪ Investing new technologies and in the skills of employees.
▪ Building up and spreading international standard, e.g., for environmental practices
▪ Spreading “good practice” in different areas, such as the environment and workplace safety.

Learn more about the roles of business organization in society by accessing this link
https://smallbusinessify.com/why-is-business-important-to-society/