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ORGANIZATION AND MANAGEMENT, Quarter 1, Week 4

I. Introductory Concept

This learning activity explains and discusses the various forms of business
organization and its economic roles in the business organization including the
advantages and weaknesses to determine the best practices in choosing a
business.

II. Learning Competencies

At the end of the learning activities, you are expected to analyze the forms and
economic roles of business organization (ABM_AOM11-1a-b-3).

What is Business?
Business is an entity or enterprise that provides goods and services in exchange
for some form of money or another. It can be a privately owned, non-profit organization
or state-owned business. These entities consider the three basic problems in economy
in establishing their business:
a.) What to produce?
b.) How to produce?
c.) For whom to produce?

There are four major types of businesses:

➢ Service Business a type of business which provides intangible products.

Service type firms offer professional skills, expertise, advice, and other similar
products.

Examples of service businesses are schools, repair shops, hair salons, banks,
accounting firms and law firms.

➢ Merchandising Business is a business which buys products at wholesale price

and sells the same at retail price. They are known as “buy and sell” businesses.
They make profit by selling the products at prices higher than their purchase
costs.

Examples are grocery stores, convenient stores, distributors and other resellers.

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 ➢ Manufacturing Business unlike a merchandising business, buys products with
the intention of using them as materials in making a new product. A
manufacturing business combines raw materials, labor, and factory overhead in
its production process. The manufactured goods will then be sold to customers.

Examples are baked good, shoe manufacturing, grape wine production, cosmetic
manufacturing, processed food, canned goods, and others.

➢ Hybrid Business is a company that may be classified in more than one type
business. A restaurant, for example combines ingredients in making a fine meal
(manufacturing), sells a cold bottle of wine (merchandising), and fills customer
orders (service).

There are basic forms of business ownership:

Business is owned by
Business is owned
two or more person
and operated by only who contribute
one person resources for the
entity
Sole
Proprietorship Partnership

Business
Ownership

Corporation Cooperative

A business A business owned

organization that has and operated by
separate personality group of individuals
from its owners. for their mutual
benefit

By considering the advantages and disadvantages of the different business

ownership, best practices will then be recognized in choosing a business to be
established.
SOLE PROPRIETORSHIP
Advantages Disadvantages
• Easiest and least expensive form of • Sole proprietors have unlimited liability and
ownership are legally responsible for all debts against
the business. Their business and personal
• Sole proprietors are in complete control, and assets are at risk.
within the parameter of the law, may make
decisions as they see fit. • May be at a disadvantage in raising funds
and are often limited to using funds from
• Profit from the business flow-through directly personal savings or consumer loans.
to the owner’s personal tax return.
• May have a hard time attracting high-caliber
• The business is easy to dissolve, if desired. employees, or those that are motivated by
the opportunity to own a part of the business.
ROV_ORGANIZATION AND MANAGEMENT_Q1_W4 2
 • Some employees’ benefits such as owner’s
medical insurance premiums are not directly
deductible from business income.

Examples: sari-sari store, flower shop, vulcanizing shop, car wash, etc.

PARTNERSHIP
Advantages Disadvantages
• Partnerships are relatively easy to establish; • Partners are jointly and individually liable for
however, time should be invested in the actions of other partners.
developing the partnership.
• Profits must be shared with others.
• With more than one owner, the ability to raise
funds may be increased. • Since decisions are shared, disagreement
can occur.
• The profits from the business flow directly
through to the partners’ personal tax return. • Some employee benefits are not deductible
from the business income on tax returns
• Prospective employees may be attracted to
the business if given the incentive to become • The partnership may have a limited life; it
a partner. may end upon the withdrawal o death of a
partner.
• The business usually will benefit from
partners who have complementary skills.

Examples: Law firms, medical clinics, and Travel and Tours

Types of Partnerships that you should consider:

1. General Partnership. Partners divide responsibility for management and liability as

well as the shares of profit or loss according to their internal agreement. Equal shares
are assumed unless there is a written agreement that states differently.

2. Limited Partnership and Partnership with limited liability. “Limited” means that
most of the partners have limited liability as well as limited input regarding management
decision, which generally encourages investors for short term projects, or for investing
in capital assets.

3. Joint Venture is like a general partnership, but is clearly for a limited period of time
or a single project. If the partners in as joint venture repeat the activity, they will be
recognized as an ongoing partnership and will have to file as such, and distribute
accumulated partnership assets upon dissolution of the entity.

CORPORATION
Advantages Disadvantages
• Shareholders have limited liability for the • The process of corporation requires more
corporation’s debts or judgements against time and money that other forms of
the corporation. organization.

• Generally, shareholders can only be held • Corporations are monitored by federal, state
accountable for their investment in stock of and some local agencies, and as a result
the company. (Note however, that officers may have more paperwork to comply with
can be held personally liable for their actions, regulations.
such as the failure to withhold and pay

ROV_ORGANIZATION AND MANAGEMENT_Q1_W4 3

 employment taxes. • Corporations may result in higher overall
taxes. Dividends paid to shareholders are
• Corporations can raise additional funds not deductible from business income; thus
through the sale of stock. this income can be taxed twice.

• A corporation may deduct the cost of benefits

it provides to officers and employees.

• Can elect Corporation status if certain

requirements are met. This election enables
company to taxed similar to a partnership.

Examples: Smart Communications, Inc, SM Development Corporation, Medical Doctors,

Inc. (Makati Medical Center), Avida Land Corporation

COOPERATIVE
Advantages Disadvantages
• Less Taxation • Less Operational Control

• Funding opportunities • Fixed Pricing

• Further marketing reach • Cooperative may suffer from slow cash flow
since a member’s incentive to contribute
• Reduce costs and improve product and depends on how much they use the
services cooperative’s services and products.

• Perpetual existence, members can join or • Lack of membership and participation may
leave the business without causing cause risk of losing members.
dissolution.

• Democratic organization, monetary

investment does not affect the weight of each
vote, so no member owner can dominate the
decision-making process.

Examples: water and electricity (utility) cooperatives, Cooperative banking, Credit

Unions, and Housing Cooperatives

III. ACTIVITIES

Activity 1 – Picture identification as to what type of business

Direction: Identify the following pictures below whether it is a service, merchandising,
manufacturing or a hybrid type of business.

1. ___________ 2. ___________ 3. ___________

ROV_ORGANIZATION AND MANAGEMENT_Q1_W4 4

 4. ___________ 5. ___________

6. ___________ 7. ___________

Activity 2 – Business Ownership Identification

Direction: Identify the pictures below whether it is a sole, partnership, corporation, or a

cooperative business.

1. ___________ 2. ___________ 3. ___________

4. _______________ 5. ___________

Activity 3

Direction: Read and identify the statements below. Underline your answer from the
given options.

1. It can be privately owned, state-owned or non-profit organizations that produce

goods and services for the exchange of money or for one another. (Business,
Proprietorship)
ROV_ORGANIZATION AND MANAGEMENT_Q1_W4 5
2. (Service Business, Hybrid Business) is classified for more than one type of
business.
3. (Manufacturing Business, Merchandising Business) they are known as “buy and
sell” business.
4. A business that produces intangible products. (Service Business, Manufacturing
Business)
5. A (corporation, cooperative) is a business owned by a group of individual and
operated a business for their common good.
6. The (Sole Proprietorship, Partnership) is the easiest and least costly to set up
when planning a business.
7. It is owned and managed by two or more person who contributed their resources for
the entity. (Sole Proprietorship, Partnership)

Activity 4

Direction: Write your answer in the crossword puzzle by referring to the statements
below.
5
M 4

E P
F
6 C O R P 0 R A T I O N A
m m m F m F F
C R
F
H 2 T
F
1 M A N U F A C T U R I N G
m m m m F F F F
N O E
F F
D O R
F F
7 S E R V I C E P S
F F
S E H
F F
I 3 H Y B R I D I
F F F F F F F
N A P
F F
G T
F
I
F
V
F
E
F

ROV_ORGANIZATION AND MANAGEMENT_Q1_W4 6

Across
1. A type of business that buys product for the intention of using them to create finished
products to be sold to customers.

3. It is a combination of different types of business.

6. The ownership of this business is through a share of stock.

7. This business offers intangible products to its customers.

Down
2. A business that is owned and managed by a group of people for their common good.

4. It is a business owned by two or more person who contributed resources and shares
profit among themselves.

5. A type of business that concerns with buying and selling of the commodities.

VI - Answer Key

Activity 1:

1. Manufacturing business 5. Merchandising business

2. Services Business 6. Service Business
3. Hybrid Business 7. Manufacturing business
4. Service business

Activity 2
1. Cooperative 4. Partnership
2. Sole Proprietorship 5. Corporation
3. Corporation

Activity 3
1. Business 5. Cooperative
2. Hybrid business 6. Sole Proprietorship
3. Merchandising business 7. Partnership
4. Service Busine

ROV_ORGANIZATION AND MANAGEMENT_Q1_W4 7

Activity 4
5
M 4

E P
F
6 C O R P 0 R A T I O N A
m m m F m F F
C R
F
H 2 T
F
1 M A N U F A C T U R I N G
m m m m F F F F
N O E
F F
D O R
F F
7 S E R V I C E P S
F F
S E H
F F
I 3 H Y B R I D I
F F F F F F F
N A P
F F
G T
F
I
F

Reflection:
I noticed _______________________________________________________

_______________________________________________________________

A question I have is _______________________________________________

_______________________________________________________________

I’m not sure _____________________________________________________

_______________________________________________________________

I realized _______________________________________________________

________________________________________________________

ROV_ORGANIZATION AND MANAGEMENT_Q1_W4 8

References:
Samar, Gregorio L. et al. (2016) Introduction to Organization and Management. Hunt
Publishing Center, 41-47.

extracted from:
http://www.mayalaw.com/2015/06/26/advantages-and-disadvantages-of-a-cooperative/

Prepared by: Reviewed:

GLENDA C. BAS MERIAM L. CAMILA

Writer Quality Assurer

JINKY A. VILLAREAL, Ed.D

EPS II - Mathematics
Consultant

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