Organization and Management PDF

SHS Organization and Management Quarter 1 – Module 4 Forms and Economic Roles of Business Organizations 1 Organization and Management – SHS Quarter 1 – Module 4: Forms and Economic Roles of Business Organizations Republic Act 8293, sectio...

SHS Organization and Management Quarter 1 – Module 4 Forms and Economic Roles of Business Organizations 1 Organization and Management – SHS Quarter 1 – Module 4: Forms and Economic Roles of Business Organizations Republic Act 8293, section 176 states that: No copyright shall subsist in any work of the Government of the Philippines. However, prior approval of the government agency or office wherein the work is created shall be necessary for exploitation of such work for profit. Such agency or office may, among other things, impose as a condition the payment of royalties. Borrowed materials (i.e., songs, stories, poems, pictures, photos, brand names, trademarks, etc.) included in this book are owned by their respective copyright holders. Every effort has been exerted to locate and seek permission to use these materials from their respective copyright owners. The publisher and authors do not represent nor claim ownership over them. Regional Director: Gilbert T. Sadsad Assistant Regional Director: Jessie L. Amin Development Team of the Module Writer: Glenda C. Bas Editors: Elsa B. Regalado Meriam L. Camila Jinky A. Villareal Reviewer: Jinky A. Villareal Illustrator: Ryan B. Cerillo Layout Artist: Glenda C. Bas Cover Art: Jed Adra 2  Good day Learner! Today, you are about to learn the different FORMS AND ECONOMIC ROLES OF BUSINESS ORGANIZATIONS This module 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. The following are the things that you will learn after the lesson: identify the different forms of business; identify the best practice in choosing a business; and recognize the weak and strong point of the different form of business. Here are words that can help you understand thoroughly the lesson: Business – is an organization or economic system where goods and services are exchanged for one another or for money. Hybrid Business – refers to companies that may be classified with more than one type of business. Merchandising Business – refers to businesses which buy product at wholesale price and sell the same at retail price. Manufacturing Business – refers to businesses which buy productions with the intention of using them as materials in making a new product. Sole Proprietor – a business is owned and managed by only one person. Partnership – a business owned by two or more persons who contribute resources into the entity. Corporation – is a business organization that has a separate legal personality from its owners. 3  Cooperative – is a business organization owned and managed by a group of individuals for their mutual benefits. Now, let’s see how far you know… Answer the questions below. Pretest: Direction: Read carefully the statement below and choose your answer from the given options. Hybrid Business Corporation General Partnership Cooperative Merchandising Business Partnership Manufacturing Business Sole Proprietorship Manufacturing Business Joint Ventures Business General Partners __________1. It is a business being run by a group of individuals for mutual benefits. __________2. A type of business that may be classified with more than one type of business. __________3. It is said to be an artificial business created by legal personality from its owners and its ownership is represented by shares of stock. __________4. It is an organization of people where good and services are exchanged from one another or for money. __________5. This is the easiest and least expensive form of ownership to organize. __________6. It is a type of business which provides intangible products. __________7. The business is owned by two or more persons who contributed resources but may have limited life; it may end upon withdrawal or death of partner. 4 __________8. Also known as “buying and selling” business. __________9. A type of business that buy products or raw materials for the purpose of transforming it into finished product to be sold to the customers. _________10. It is a type of partnership where partners divide responsibility, liability and shares of profit or loss in the business. How do you find the test? Don’t worry if you feel you got a low score. Just remember that there’s always room for learning. Proceed to the next activity. Learning is fun! Before you proceed to the discussion, can you identify the following pictures below? 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. ___________ 4. ___________ 5. ___________ 5  6. ___________ 7. ___________ Now, try to know this… There are Different Types of 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. 6  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). Now, I know you can do this out. Try the next activity. Have fun! 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. ___________ 7  What more should I know? 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 How do they differ from the other? 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. 8  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. 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. 9  CORPORATION Advantages Disadvantages Shareholders have limited liability for the The process of incorporation 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 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. Example: water and electricity (utility) cooperatives, Cooperative banking, Credit Unions, and Housing Cooperatives 10  Now let see what you have learned… Please answer the succeeding activities below. Practice Task 1 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) 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) Very good learner, you’re doing great! Now, try the next activity… 11  Practice Task 2 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 1. A type of business that buys product for the intention of using them to create finished products to be sold to customers. 2. A business that is owned and managed by a group of people for their common good. 3. It is a combination of different types of business. 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. 6. The ownership of this business is through a share of stock. 7. This business offers intangible products to its customers. 12  Good job! You are now about to complete the module by answering the final test prepared for you. Good luck learner! Direction: Encircle the letter from the given options that corresponds to the statement in each item. 1. It is an organization of people where goods and services are exchanged for one another or for money. A. Business C. Commodities B. Partnership D. Services 2. It is an artificial business created by legal personality from its owners and its ownership is represented by shares of stock. A. Corporation C. Sole Proprietor B. Cooperative D. Partnership 3. A type of business which provides intangible products to the customers. A. Hybrid business C. Manufacturing business B. Merchandising business D. Service business 4. A certain business managed by a group of individuals for mutual benefits. A. Sole Proprietorship C. Partnership B. Cooperative D. Corporation 5. The business is owned by two or more persons who contributed resources but may have limited life; it may end upon withdrawal or death of partner. A. Corporation C. Partnership B. Sole Proprietorship D. Cooperative 6. This business is classified as having more than one type of business. A. Service business C. Manufacturing business B. Merchandising business D. Hybrid business 7. This is the easiest and least expensive form of ownership to organize. A. Sole Proprietorship C. Partnership B. Cooperative D. Corporation 8. A type of business where they buy products or raw materials for the purpose of transforming it into finished product to be sold to the customers. A. Service business C. Manufacturing business B. Merchandising business D. Hybrid business 13 9. A partnership where partners divide responsibility, liability and shares of profit or loss in the business. A. General Partnership C. Joint Venture B. Limited Partnership D. Preferred Partnership 10. This business is also known as “buying and selling” business. A. Service business C. Manufacturing business B. Merchandising business D. Hybrid business Additional Task: Conduct an interview to the owner of a store near you. Know the type and form of the business. Ask why he/she chooses such business? For how long now he/she manages and operates his/her business? 14 Pretest: 1. Cooperative 5. Sole Proprietorship 2. Hybrid business 6. Service Business 3. Corporation 7. Partnership 4. Business Learning Activity 1 1. Manufacturing business 5. Merchandising business 2. Services Business 6. Service Business 3. Hybrid Business 7. Manufacturing business 4. Service business Learning Activity 2 1. Cooperative 5. Partnership 2. Sole Proprietorship 6. Corporation 3. Corporation Practice Task 1 1. Business 5. Cooperative 2. Hybrid business 6. Sole Proprietorship 3. Merchandising business 7. Partnership 4. Service Business Practice Task 2 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 15 F Post Test 1. A 6. D 2. A 7. A 3. D 8. C 4. B 9. A 5. C 10.B Reference: 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/ Thank you learner. You did great! Stay safe. 16