Local Business Environment

Factors affecting Business in the Philippines

-rank 56th in most competitive nation in the world out of 140 countries in 2018 edition of Global
Caompetitiveness Report

The current administrations program in improving economy

-Build Build Build

-TRAIN Law

-Innovative Startup Act

-Strict Implementation of Anti Red Tape Act

Philippines imposed foregin ownership restriction (Foreign Investment Act aka 60-40 rule)

17 procedure and 80 days to establish foreign owned business

Constitution prohibits foregin companies from buying land

-The Filipino way of doing business is influenced by East and West

-by means of friendly relationship

-English is the official business language, documents are written in english

Season

- Christmas is a time to show appreciation

-13th month pay

-Christmas breaks and holidays

-2nd quarter of the year summer season, last quarter of the year rainy season

-Valentines, Graduation, Summer, Rainy, Halloween, Christmas

Culture - heavily influenced by western products particularly american brands

International

Many international companies take advantage of lax labor laws in certain countries like China

Taboos - social or religious customs that prohibit

Japan - observe a strong group orientation

Arab - women are not given management positions

Language, antics, fashion

Rewards and punishment stystems

Role of Business in the Economy

-enables the flow of money and resources in and out of the country

-increased profits and better conditions for emerging businesses, leading to economic growth
Phases of Economic Development

Mercantilism (1500-1780) - rise of major European colonial powers such as Spain and Portugal
brought the emergence of the mercantilist system of trade aka barter trade

Industrial Revolution (1780 - 1880) - production and distribution became mechanized since many
businessmen saw the benefit of investing in machines and equipment. It led to the construction of
large factories and an increase in employment.

Fordism (1880 - 1970) - This phase saw the rise of multinational corporations through the pioneering
work of Henry Ford of Ford Motor Company. Ford introduced a standardized production process for
his Ford Model. Mass production

Post Fordism (1970-2010) - Computer controlled tools and efficient techniques customized and
tailored the production process to a particular location. The internet provided a more convenient
medium for communication among consumers, suppliers, investors and employees

Globalization (2010 - present) - Companies are operating within a global marketplace and economy.
This has given rise to the establishment of regional economic organizations that enable companies
from different countries to engage in free trade with each other.

Forms of Business Organizations

Sole Proprietorship - firm owned by one person who handles all the day to day activities of the
business

Advantage - most manageable and least expensive form of ownership

- complete control over the business

-make decisions based on their own judgement

Disadvantage - unlimited liability

-may put personal assets at risk

-obtaining additional capital is difficult because of a low guarantee of profitable returns to

lenders
Partnership - ownership of the business is shared by two or more members who mutually agree on
the method of decision making and profit and loss sharing

General partnership - form of partnership wherein the partners have unlimited liability for the debts
and obligations for the partnership

Limited partnership - form of partnership wherein one or more general partners have unlimitied
liability and the limited partners have liability that is only up to the amount equal to their capital
contributions

Advantage - wider capital base, allows for diversification and expansion is easier.

Disadvantage - jointly liable fo all the obligations and effects stemming from the decision of other
partners, limited life because of general instability

Corporation - ownership of business owned by five to fifteen owners called shareholders and enjoys a
personality distinct from its owners.

Stock corporation - capital stock divided into shares and dividends.

Non stock corporation - does not issue shares of stocks and established primarily for public interests.

Advantage - limited liability to shareholders, deduct the benefits it provides to its employees, general
stability

Disadvantage - process of forming the corporation is more complicated due to it is closely monitored
by the government

Foreign Business Organizations

Branch office - organized to do the activities of the head office from the host country

Representative office - deals directly with the clients of the parent company

Regional headquarter - supervises and coordinates its subsidiaries, affiliates and branches in the
region

Regional operating headquarters - provide services like administration and planning, acquisition of raw materials,
marketing, and communications to its affiliates and branches

Classification of Businesses

1. Service Business - type of business that provides labor and other services to customers.

2. Merchandising Business - type of business that purchases products from other businesses and sells them to
customers at a higher retail price

3. Manufacturing business - type of business where raw materials are transformed into finished goods through
product processing, labor and other manufacturing processes.