APPLICATION OF BUSINESS MATHEMATICS IN INDUSTRY IN THE PHILIPPINES

By
Mark Joseph C. Valera, ABM-1E

Submitted to
Rikkie Mae E. Boyoro, LPT
Business Mathematics teacher

March 11, 2020

TABLE OF CONTENTS

Title page……………………………………………………………………………………………………………...

What is business mathematics? ................................................................................................................1

Use of business mathematics…………………………………………………………………………..………1-2

Advantages of business mathematics…………………………………………………………………………..2

Business Industries in the Philippines………………………………………………………………………..2-6

The future of business industry in the Philippines…………………………………………………………..6-8

Application and implications in business industry…………………………………………………………...8-12

 Students
 Entrepreneurs
 Society
 Government

Conclusion………………………………………………………………………………………………………....12

References……………………………………………………………………………………………………..….12
BUSINESS MATHEMATICS

Mathematics is an important part of managing business. Business and mathematics go hand in hand
this is because business deals with money and money encompasses everything in itself. There is a
need for everyone to manage money as some point or the other to take decisions which requires
everyone to know mathematics. Business mathematics is used by commercial enterprises to record and
manage business operations. Commercial organizations use mathematics in accounting, inventory
management, marketing, sales forecasting, and financial analysis. It helps you know the financial
formulas, fractions; measurements involved in interest calculation, hire rates, salary calculation, tax
calculation etc. which help complete business tasks efficiently. Business mathematics also includes
statistics and provides solution to business problems.

Business is always surrounded with challenges which need to be dealt with in a proper fashion so that
they do no arise in future. These problems that occur on a daily basis can be effectively solved with the
help of mathematical models. Hence mathematics not only helps to calculate but also analyze business
problems and work upon them. Learning and using business mathematics enables a person to think out
of the box, sharpens one’s thinking and helps in precisely formulating and structuring relationships.

USE OF BUSINESS MATHEMATICS

In order to known a business it requires skill more than the developing a product or providing a service.
If a business has to survive ad succeed it needs to look after the finances and make necessary
arrangements for it to prosper as well. Understanding business mathematics is important to maintain
profitable operations and accurate keeping of records. It is required right from the start for pricing
products/services till the end when we need to check if the budget was met. Let’s look at situations
where business mathematics is required:

 Production costs calculation

Before one formally starts production and establishes its business it is very important to estimate the
costs that would be incurred in relation to the manufacturing such as the cost of raw materials,
machinery, rent, administrative expenses etc. In addition to these basic expenses there are other
associated costs such as marketing, warehousing, interest and repayment of loans etc. Once all he
expenses relating to production have been included I would be easy to estimate the profit from it to
sustain and remain competitive in the market. Accurately determining the cost associated with each item
will make the base for the business strong.

 Price determination
When you have successfully determined the costs, the next task is to price the products correctly so that
it generates right amount of cash flows for future requirements of the business. Charging the correct
selling price would ensure that the product remains profitable.

 Profit Measurement
These require determining the net profit by subtracting the operating costs from the total amount of
sales/revenue during a period of time. What also needs to deducted are the tax, depreciation, discount
expenses. This helps to find out if the products are being charged enough to continue the business
operations and expand.

 Financial Analysis
You need to project the revenue and expenses of a business if we need to analyze the financial health
of a business. We need to do sensitivity analysis of how an increase or decrease in sales figure or
pricing could affect the business. It helps in determining how each employee contributes to the business
and how I would affect. Using business mathematics helps in making these interpretations ad take the
business to a higher level.

 Career in Business Mathematics

In addition to mathematical knowledge any person who wants to make their career in business
mathematics one needs to also have knowledge of subjects like economics, finance and business
management in order to open up many doors in this challenging field. As far the skills goes one has to
have good oral and written communication skills as business mathematicians need to work on teams,
collate research and be in contact with clients.
Since all corporations require managing their money and business many mathematicians find
employment in these fields. Mathematicians follow a logical thinking;follow a problem-solving approach
to business.

Companies hire mathematicians to work as the following:

 Actuaries
 Financial analysts
 Insurance underwriters
 Budget Analysts
 Market Research Analyst
 Securities Analyst
 Footer

ADVANTAGES OF BUSINESS MATHEMATICS

Business mathematics is mathematics used by commercial enterprises to record and manage business
operations. Commercial organizations use mathematics in accounting, inventory management,
marketing, sales forecasting, and financial analysis. Following are some of the advantages of business
mathematics
1. With interest rate of maths, businessman can calculate the interest on debt, loan or bonds.
2. With matrix , businessman can calculate salary bill of different department and branches.
3. With Linear programming , business can determine the quantity of two products at which profit is
maximize or cost is minimize.
4. With discounting and factoring technique businessman can calculate present value of bill, rate of
discounting the bill and banker's gain.
5. With currency translation formula of maths, businessman can cost of currency between two countries.
6. With Assignment solution technique businessman can solve transportation problems.
7. Large number of business estimations are done on the basis of probability theory of business
mathematics.

BUSINESS INDUSTRIES IN THE PHILIPPINES

1. Tourism (Hospitality & Leisure)

The tourism sector took a big piece of the GDP pie in 2017 when it accounted for 21 percent of the
whole economy.

How much exactly in pesos? A hefty P3.35 trillion in total (per the report from World Travel and Tourism
Council).

Those figures alone should tell you how big of an impact the tourism industry provides in terms of
economic growth. Aside from the revenue generated, it also generated 2.3 million jobs.

And this figure is expected to grow in the next few years. There’s also the added benefit for jobs not
directly related to tourism but are positively affected by the business it brings.

Per current estimates, this industry generated 7.8 million jobs for both direct and non-direct tourism
business, which is about 19.2 percent of our country’s total workforce.

Tourists spent a total of Php 379.7 billion in 2017. And it was projected that it foreign arrivals will grow
this year, with numbers of visitors from Korea, Japan, and China steadily increasing.
2. Manufacturing
The manufacturing industry received the biggest FDI in 2018 at $169 million (64.1% of the total FDI
received by the country).

An indicator that foreign investors see continuous potential in this industry as shown by their willingness
to pour millions of dollars into it.

Manufacturing covers the creation of products that include food and beverage, petroleum, transport and
industrial equipment, textile, and others.

3. Real Estate
I’ve previously explained in this article why Real Estate is still considered to be a flourishing industry
even when it has already achieved so much in the last few years.

Once the government’s Build, Build, Build (BBB) program takes off, expect even more commercial and
residential units to get built. With improved transportation infrastructure and creation of more jobs,
Pinoys are projected to have more spending power.

Businesses can also expand outside of Metro Manila when better infrastructures for transportation get
built.

The previously “hard to reach” locations will start to look more feasible to investors and start another
chain of supply and demand cycle within the real estate sector.

The real estate industry also receives a big share of annual foreign direct investments, a sign that
investors abroad still see plenty of growth potential in this industry.

4. Construction
The Philippine Statistic Authority reports growth by as much as 16.1% in the 3rd quarter of 2018.

This is dramatically better than the 4% growth posted in Q3 of 2017. PSA credits increased projects for
both public and private construction as primary drivers for this terrific growth.

A big part of this growth can be credited again to the government’s BBB program. Through heavy
spending on the development of the country’s infrastructure, more jobs and opportunities are created in
the construction industry.

5. IT, BPO, and Business Services

This industry has served as one of the top contributors to our economy in the last decade.

After establishing itself as the premier destination hub for international businesses who need to
outsource their manpower (call centers, business services, digital services), the Philippines continue to
hold its strong position in attracting investments from foreign companies.The government’s lofty
infrastructure goals should positively affect our labor force and see increased efficiency and effectivity
from our workers.The introduction of a third telco is expected to bring much-needed improvement to our
internet connectivity (competition is good) for the masses and make us more competitive in the global
digital job market.

6. Banking & Finance

According to the BSP, the Philippines experienced sustained growth in 2017 amidst volatilities in market
conditions and increased sophistication of financial services worldwide.
To quote, “Lenders’ strong balance sheets, with positive double-digit growth in assets, loans,
investments, deposits, and capital, supported the banking system”,

Annual assets from banks increased by 11.6% thanks to increased income from lending activities. A
steady uptick in deposits led to an 11.6% increase which helped this industry’s net profit post a 9%
improvement.

The industry also started to take advantage of the digital technology available in order to make their
services reach more people and provide more efficient services.

At the start of 2018, the Philippines is said to have 587 banks and 11,206 branches.

There are currently more than 20,000 ATM machines in operation and at least 70 banks right now
feature electronic banking services.

Other financial institutions (non-banks like pawnshops, brokerage firms, remittance businesses,
investment houses, etc) also experienced sustained growth.

7. Gaming
Integrated resorts, properties which feature casinos within its facilities Resorts World, Solaire, City of
Dreams, Okada are all examples.

The last 3 make up “Entertainment City”, which brought more than 109 billion pesos in gross revenue
last year. The mass-oriented approach of this industry makes the country unique when compared to
Singapore and Macau which mainly cater to “premium” customers.

Wherein you need to pay for entrance in a casino on those countries, it’s not required here. This lead to
more domestic participation.

More integrated resorts are expected to rise outside of Manila, in Cebu and Clark to be exact, per the
information revealed in the Asian Markets conference.

The country also allows the junket system, which lets junket operators offer travel and hotel
accommodations for free to VIP gamblers from abroad.

The goal is to attract them to play here by offering these perks as well as lend money and collect debt to
these players.

8. Retail
Amidst the current pesky inflation rate, overall spending and consumption among consumers are still
high, thanks to the country’s high employment rate.

This is important because retail depends on continuous public spending to drive its growth. And we’ve
been on a steady rise, according to Philippine Retail Association president Rose Ong.

Online shopping has been a driver of this rise. More Filipinos utilize mobile technology to fulfill their
shopping needs. According to Ong, it’s easier now to become a retailer through the convenience of the
internet.

With an online shop, you can reach thousands of customers that would otherwise be out of reach.

Brick and mortar stores also saw an increased presence in key locations. The small store format,
specifically, saw a significant increase in numbers.

Convenience, choice, price, and location are what customers generally look for nowadays when it
comes to their preference in physical stores. This is perhaps why convenience stores saw the most
increase in numbers in the last few years.
Source: Marketing Interactive

9. Energy
The PSA lists a 5% growth for electricity, gas, and water supply for q3 of 2018.

Electricity takes up a huge portion of this growth (almost 90%), with an increase of 4.5% year on year.

From the energy sector, focus and growth seem to be on the solar energy market.

In fact, the Philippines was recognized as the number 1 country in developing countries in Asia in terms
of solar energy adoption and usage (2017)

Solar energy is steadily rising to become a cheap energy resource alternative. And with the Philippines
being able to secure significant solar projects last year, with more in the pipeline, it proves its potential in
expansion and taking in more business.

10. Healthcare
The healthcare industry seems to be picking up steam was the country’s total health expenditures grew
by 8% last year which was worth Php 712 billion, a 4.5% overall contribution to the country’s GDP.

According to the PSA, an average of Php 6,791 was spent on health by each Pinoy in 2017.

Recent acquisitions of multiple hospitals by Metro Pacific Investments and increasing options in the
HMO industry can be pegged as indicators on the country’s advance towards better healthcare systems.

11. Automotive and Shipbuilding

The industry covering “Trade and repair of motor vehicles” (automotive/shipbuilding) posted a 5.6%
growth in Q3 of 2018.

With the increasing number of vehicle purchases over the last few years, expect further growth in this
category since aftermarket services (maintenance and repair) will be needed for these vehicles.

12. Agriculture
Agriculture is the country’s Achilles’ Heel in comparison to other industries in this list in terms of growth.

It dropped 0.4% for Q3 of 2018 which is worse than the 3.9% increase from last year.

There seems to be no focus on this industry in terms of finding and implementing ways to improve the
situation. Granted, extreme weather conditions (typhoons), infestations, and low utilization of high-yield
crop varieties are major issues that put us in a non-ideal situation.
However, development on areas like providing farmers with access to credit, technology, education, as
well as direct linking between production and market is still very much unaddressed and will need all the
help it needs if we are to maximize the country’s strong agricultural DNA.

Investment in the areas mentioned above could provide the industry with a much-needed boost and lead
to an improved agricultural sector. However, support from the government is absolutely necessary if we
want this to happen.

THE FUTURE OF BUSINESS INDUSTRY IN THE PHILIPPINES

In fast-changing times, it is the responsibility of leaders and visionaries to redefine what it means to
contribute to society and prepare for the coming future. The landscape of Philippine business particularly
has vastly changed with the impact of emerging technologies coinciding with the rise of a new
generation of workers.

With technology having a bigger role in changing the way firms do business, success has become a
matter of leveraging emerging fields like automation, artificial intelligence (AI), data analytics, blockchain,
the Internet of Things, among many others. It is now becoming more crucial to have a deep and
nuanced understanding of their intended and unintended impact.

It is to this goal that BusinessWorld, the most read and most respected business newspaper in the
Philippines, once again held its annual BusinessWorld Economic Forum in the Grand Ballroom of Grand
Hyatt Manila in Bonifacio Global City, Taguig City on May 31.

Already on its fourth year, the forum has become the country’s most anticipated event for gathering
thought leaders, industry experts, business executives, government policy makers, innovators,
academicians, technology providers and more to discuss the myriad realities and concerns that are
transforming the landscape of Philippine business. This year, more than 700 high-level attendees came
together to explore the theme, “The Future of Business: Next-Wave Disruptions & Opportunities,”
highlighting the promises and dangers of technology and how these will impact businesses over the next
10 years.

In photo (L-R) are Danie Laurel, moderator and anchor at One News; Miguel Belmonte, president and
CEO, BusinessWorld; Jaime Augusto Zobel de Ayala, chairman & CEO, Ayala Corp.; His Excellency
Cesar Virata, former Prime Minister of the Philippines; and Roby Alampay, moderator and editor-in-chief
of BusinessWorld.

Leading the discussion is Jaime Augusto Zobel de Ayala, chairman and CEO of Ayala Corp. As head of
one of the oldest and largest conglomerates in the Philippines — one that has interests in a wide
spectrum of industries like retail, education, health care, management, automotive, energy, and banking
— he shared his insights on the changing times and underscored the importance of vigilance amid such
disruption.

“Here in the Philippines, there seems to be a pervasive mind-set that industries may be slower to
change, or that disruptions will hit us a little bit more gradually,” he said in his keynote address.

“However, if you look at industries like e-commerce or FinTech, the pace of change in
telecommunications, and how the rise of technologies and new players have changed the landscape
dramatically in the past decade alone, you’ll see that change is happening here as quickly as it is
anywhere else. And if one doesn’t accept that, you really have a good chance to be left behind.”

Mr. Zobel de Ayala presented examples of how Ayala Corp. is leveraging innovation to create
opportunities for the company as it moves forward into the future, through investments, the constant
monitoring of trends and technologies, and nurturing a skilled and collaborative environment.

Keynote Speaker Jaime Augusto Zobel de Ayala, chairman and CEO of Ayala Corp.

“Now more than ever, in many ways for all of us in the business environment, the private sector can no
longer be reactive. Companies that don’t innovate really run the risk of becoming irrelevant in our
market. We need to be proactive in finding gaps in our current systems, even when it means that we
have to be the ones disrupting ourselves,” he said.
Following Mr. Zobel de Ayala was a series of talks on the impact of automation and artificial intelligence
on people, skills, and management. Opening the session was Kristine Romano, managing partner of
McKinsey & Company Philippines, who explored how the job market will be changed, rather than be
displaced by, emerging technologies.

Ms. Romano proposed that as technologies such as AI and robotics become more sophisticated,
workers would need to learn new cognitive skills in order to adapt. Rizalina G. Mantaring, president of
the Management Association of the Philippines, followed it up with her talk about defining management
and leadership in a workplace wherein both humans and robots cohabitate.

In this new workplace, skills are the primary currency. That is according to Susie Lee, vice-president of
Global Business Solutions at education technology firm Degreed. A new set of skills would be needed to
navigate the problems and obstacles of the future — exactly the kind that the newest generation of
workers, the Gen Z, are equipped to face. Pauline G. Fermin, managing director of Acumen Strategic
Consulting, Inc., urged companies to welcome this new generation and adopt to their tech-centric
worldview to effectively build the needed capabilities of the future.

The following session discussed the unstoppable growth of digital commerce, and how big data and
mobile technology can shape the future of retail. Shiv Choudhury, partner and managing director of
Boston Consulting Group Singapore, shared his strategies for retail through adopting agile,
democratized technology, utilizing e-commerce and analytics, and ensuring a personalized, omni-
channel experience for consumers.

Globe Telecom Senior Vice-President for Enterprise Group Peter D. Maquera, meanwhile, identified the
opportunities presented by big data and mobile technology in retail by providing statistics on the
sustained growth of Filipino mobile users and the data they are willing to provide companies in exchange
for services like e-commerce and delivery. Lazada Philippines CEO Ray Alimurung, in his talk about
New Retail, said that Southeast Asia is currently the “battleground” in e-commerce, with the industry
growing to about $240 billion by 2025.

Mr. Alimurung welcomed the early age of New Retail, and encouraged innovators to explore concepts
like livestreaming, offline to online capabilities, and gamification to provide new and better experiences
to consumers. Such innovation is also needed in the area of logistics, Entrego Philippines President
Constantin Robertz said, as the industry is undergoing an explosion brought about by e-commerce and
mobile delivery. Digital transformation, he said, is changing the requirements of traditional business
supply chains, and he believes that logistics is an industry ripe for rapid transformation.

Also in need of innovation and commitment is the industry of automobiles. In an era of climate change,
sustainability is a more important goal than ever. Toyota Motor Philippines President Satoru Suzuki
envisioned the future of mobility as he presented his company’s plans to become a more sustainable
company by 2050. Toyota’s measures include shifting to electric vehicles, reducing carbon emissions,
water wastage, and utilizing renewable energy in its production cycle.

“Toyota continuously strives to implement the appropriate measures towards this cause, ever exceeding
customer expectations, enriching lives and commitments. By doing so, we’ll be able to achieve
sustainable mobility for all,” Mr. Suzuki said.

To explore financial technology and the future of money, Frost & Sullivan, Asia Pacific Managing
Director and Partner Shivaji Das highlighted social, regulatory, technological, and business model trends
driving change in the banking sector worldwide. Trends like virtual banking, augmented reality, cloud
computing, cognitive security, and analytics are pushing banks on the path towards a digitized future.
Noel A. Santiago, chief digital officer of the Bank of the Philippine Islands, contextualized such trends
and changes, exploring what such digital transformation means for local banks. He suggested that
banks should work with financial technology start-ups who are fluent in these emerging technologies,
and leverage their skillsets for a mutually beneficial partnership.

Lito Villanueva, founder of FinTechAlliance.ph, extolled the benefits of a cashless economy, illustrating
how it might empower the unbanked and underbanked sectors and engender financial inclusion, after
which Bangko Sentral ng Pilipinas Senior Director and Officer-in-Charge for Financial Technology
Vicente T. De Villa III followed up with a talk on how financial institutions can utilize technology to fortify
their future.

One News channel on Cignal TV will present a BusinessWorld Economic Forum Special on June 12,
9:30 a.m., with host Daphne Oseña-Paez.
The final session of the Economic Forum further delved into the promises of the future, as it focused on
the next generation of technology and how the future of the economy can change the world. Launching
the discussion was Alliance Global CEO Kevin Andrew Tan, who shared his company’s insights on the
trends of tomorrow. Ever more connected by technology, Mr. Tan said that society will also change
shape accordingly, bringing forth a society that is always on-demand and is driven more by community
and shared values.

Andrés Ortola, country general manager of Microsoft Philippines, envisioned a future wherein AI will
empower the productivity and the imagination of the workforce, accelerating the rate of innovation even
further. Maria Francesca F. Tan, CEO of the MFT Group of Companies, expanded on this by discussing
which industries are most likely to see such changes sooner rather than later, and what the role of
private equity will be in this new, unknown world.

Jojo Gendrano, PLDT Enterprise first vice-president & head of Enterprise Core Business Solutions,
explored the horizons of the connected age. Finally, Aileen Judan-Jiao, president and country general
manager of IBM Philippines, capped off the forum with an in-depth look into the future of technology, her
predictions on the next wave of disruptive technologies, and how they will yet again change life as we
know it.

CREDITS BY: Bjorn Biel M. Beltran, Special Features Writer

APPLICATION AND IMPLICATIONS IN BUSINESS INDUSTRY

IN STUDENTS

Recently, I’ve read a lot about the lack of services available for adult learners. These learners need a
different set of support services than traditional students, but the services they need, including child
care, long-term credit counseling and help with job placements, are often unavailable. While this is an
important concern, I worry that there are bigger problems facing adult students, chiefly industry
Relevance.

A recent research report entitled The Voice of the Employer on the Effects and Opportunities of
Professional Development points out that instead of solely focusing on support services, colleges and
universities alike need to work towards giving students the exact skills they need if students are to find
long term success and rewarding jobs. It makes sense if you think about it. Today, skills are more
important than credentials in many industries. If students are not equipped with the right skills, their
degree will be of little practical use, regardless of how supported they were through the process.

A college or university that responds quickly to industry needs will not only attract individuals looking for
employment, but they will also attract corporations looking for professional development opportunities for
their employees. The research paper points out that 95% of corporations financially support ongoing
education, with their spending annually totaling approximately $172 billion. However, the vast majority of
this spending is funneled into internal training programs or allocated to external contractors. Colleges
and universities are missing out on this critical revenue stream because employers believe that their
programs are not relevant enough. The report revealed that only 16% of employers feel that there is an
adequate availability of college or university programs tailored to their needs and only 9% of
corporations are currently engaged in a partnership.

To me, this represents an opportunity for higher education institutions.

Employers are saying that colleges and universities must work more closely with industry in order to
teach to their needs. Here is what a few of the surveyed employers had to say about the usefulness of
higher education institutions:

 As the world changes, we need to continue to educate our employees, especially as it relates to
technology. The question is whether colleges can keep up with industry. If they can, then we will
use them more.
  Institutions need close consultation with business before mounting specific courses for specific
industry disciplines.
 Institutions need to offer classes more closely tailored to the real world. Universities should
partner with companies to offer the curriculum that will make the students more valuable to
companies.

Currently, structural unemployment issues are plaguing North America because the skill sets possessed
do not match the skills needed. In fact, despite there being 9.3 million Americans unemployed, the
Bureau of Labor Statistics reported that there was a shortage of 7 million skilled workers in 2010 and
expects that shortage to climb to 21 million workers by 2020. This needs to change.

By working more closely with industry, higher education institutions will be able to produce graduates
who are more likely to succeed in the workforce and more aptly skilled for gainful employment.
Furthermore, institutions will open up a new revenue source through corporate learning channels.
Transitioning higher education into the 21st century is a complicated issue, with numerous moving
pieces. Tailoring programs based on industry needs makes up a critical piece of the puzzle.

IN ENTREPRENUERS

Entrepreneurship is important as it has the ability to improve standards of living and create wealth, not
only for the entrepreneurs, but also for related businesses. Entrepreneurs also help drive change with
innovation, where new and improved products enable new markets to be developed. Economy wise,
higher earnings thanks to entrepreneurship can help boost national income and tax revenue.
Entrepreneurs contribute in other ways as well, such as investing in community projects and supporting
local charities. Too much entrepreneurship (i..e, high self-employment) can be detrimental to economic
development.

 Is All Entrepreneurship Good?

Are there any drawbacks to cultivating entrepreneurs and entrepreneurship? Is there a limit to the
number of entrepreneurs a society can hold?

Italy may provide an example of a place where high levels of self-employment have proved to be
inefficient for economic development. Research has shown that Italy has experienced large negative
impacts on the growth of its economy because of self-employment. There may be truth in the old saying,
"too many chefs and not enough cooks spoil the soup."

IN SOCIETY

In the developed world, business plays a much more important role in society than it does in the less
developed parts of the world. There is also a much wider consensus that business is a force for the good
of society. However, of late, that assumption has come under closer scrutiny. There is a growing
articulation of the need to understand the role of business in society.

Various authors have argued for a range of corrections, though there is by no means a consensus. At
one extreme, some argue that as long as businesses act ethically and legally, they need not concern
themselves with larger social goals. Milton Friedman (Friedman, 1970), in a classic article, says, ‘The
whole justification for permitting the corporate executive to be selected by the stockholders is that the
executive is an agent serving the interests of his principal. This justification disappears when the
corporate executive imposes taxes and spends the proceeds for "social" purposes. He becomes in effect
a public employee, a civil servant, even though he remains in name an employee of a private enterprise.
On grounds of political principle, it is intolerable that such civil servants—insofar as their actions in the
name of social responsibility are real and not just window-dressing—should be selected as they are
now. If they are to be civil servants, then they must be elected through a political process. If they are to
impose taxes and make expenditures to foster "social" objectives, then political machinery must be set
up to make the assessment of taxes and to determine through a political process the objectives to be
served’. He goes on to contrast the capitalist and socialist systems: ‘This is the basic reason why the
doctrine of "social responsibility" involves the acceptance of the socialist view that political mechanisms,
not market mechanisms, are the appropriate way to determine the allocation of scarce resources to
alternative uses’. He concludes that ‘there is one and only one social responsibility of business—to use
its resources and engage in activities designed to increase its profits so long as it stays within the rules
of the game, which is to say, engages in open and free competition without deception or fraud’.
It is important to recognise that this view was articulated in 1970 when there was a lot of debate about
the virtues or otherwise of the free market system. The argument here is essentially based on the right
to private property, right to earn profits on capital, and the free market system. Friedman also
characterised ‘the present climate of opinion’ as one having ‘wide spread aversion to “capitalism”,
“profits”, and the “soulless corporation”’.

Later authors have justified the same point of view, not on the basis of political principle, but on the basis
of what is most effective and efficient for a business to do. In this view, businesses will in fact serve
society best by focussing on what they know how to do well—namely create products and services that
customers value. The economist Barro (2007) argues that Bill Gates contributes more to society through
Microsoft than through his foundation. According to such a view, business makes the world a better
place to live in by producing products that consumers value. Poverty can be addressed better by
improving the economy than by massive amounts of aid. Altman and Berman (2011) argue that ‘With a
long enough time horizon, many social benefits created by the operations of for-profit companies can
generate private benefits for the companies themselves. As a result, executives planning for the long
term create social benefits in the most efficient way when they target a single bottom line – profit.
Though calculating the private value of social initiatives under a single bottom line requires the use of
estimates and probabilities, this approach offers greater efficiency in decision-making and more
sustainable social benefits than schemes such as corporate social responsibility, creating shared value,
and double- or triple-bottom lines’. By the time these arguments were made, the West was far more
secure about the widespread acceptance of the free market system.

Other scholars have a slightly different view on the issue. Some argue for an explicit recognition of the
need for a greater involvement of business in society. This seems to be a response to the shortcomings
of business in recent times, and an attempt to recapture a position of moral strength. It is often based on
environmental and sustainability considerations, and adverse impacts on society and consumers. The
Confederation of Swedish Enterprise, in its report on the Role of Business in Society (2004), reiterates
that business is the cornerstone of prosperity in society, and that businesses create the resources that
lead to development and welfare. The report makes a clear distinction between the ‘civic involvement’ of
companies and corporate social responsibility, which is a less broad concept. Aiming to ‘stimulate an
attitude among businesses that is thoughtful, ambitious and farsighted as far as norms and values are
concerned’, the report recognises the need for a wider involvement in society, particularly the need to
‘increase awareness of the role of business in society and the importance of acting in harmony with
social norms’.

On the wider role of business, Davis (2005) emphasises that it is ‘time for CEOs of big companies to
recast this debate and recapture the intellectual and moral high ground from their critics’. Outlining an
agenda for action in their report on the role of business in society, Fitzgerald & Cormack (2006), say,
‘The role of business in society is on the board room agenda. … business needs to continuously invest
in its relationship with society and to account for its use of natural resources’. The International
Organization of Employers adopted the following resolution in their General Council in May 2005 (‘CSR:
An Employers’ Approach’, 2005) —that CSR is ‘Initiatives by companies voluntarily integrating social
and environmental concerns into their business operations and in their interaction with their
stakeholders.’

In addition to sustainability and environment, there are increasing concerns about morality and
responsibility. The Directorate General for Research & Innovation at the European Commission says in
its report (‘Towards a greater understanding…’, 2011): ‘The recent world financial and economic crisis
revealed a considerable deficiency of responsible management and accountability of financial
institutions which contributed significantly to the chaos on the markets and the depth of the crisis. Due to
this, it is time for a much broader definition of the role and responsibility of business in the globalised
world, where growing responsibility should go hand in hand with growing influence. Many business
leaders are aware of this need and their increasing engagement in dialogue with academics,
stakeholders and policy makers demonstrates their readiness to face societal expectations.’ All these
are responses to recent crises.

Another set of authors tries to examine whether it is possible to make higher profits by serving society.
Fisman (2011) says: ‘Is it really possible to do well by doing good — to save the world and earn more
money as a result? This apparent free lunch may be possible if today’s conscientious consumers seek
products made by kinder, gentler companies — and are willing to pay a premium for them. By analysing
hundreds of thousands of eBay listings, we find that consumers are more likely to purchase products
from sellers that bundle their listings with charitable contributions, and are willing to pay higher prices for
these charity-linked goods’. In his view, ‘This certainly isn’t to suggest that programs that don’t add to the
bottom line should be dropped by corporate America. But it’s best to be honest about whether you’re
doing well by doing good, or simply doing good for its own sake’.
Porter and Kramer (2011, 10) take this much further. They argue for a more overarching framework
where not only do businesses act responsibly, but in the very process of doing good to society, they
create more value for themselves. They say that ‘In recent years business increasingly has been viewed
as a major cause of social, environmental, and economic problems. Companies are widely perceived to
be prospering at the expense of the broader community’. They go on to add, ‘the purpose of the
corporation must be to create shared value, not just profit per se’. By shared value they mean that
societal needs must define markets and not merely economic needs. They argue for an expansion of
both social and economic value. For instance, they say that while fair trade can increase farmers’
incomes by about 20%, the concept of shared value can increase it by 300%. This may require initial
investments and better procurement and management practices, but these pay for themselves in the
long run.

More recently, the debates and arguments have been further developed to include the role of corporate
philanthropy. In this view, the role of governments was shrinking, and their ability to deliver good
management was questionable. Hence there is a need for a greater role of the corporation in addressing
the problems of society. In Philanthrocapitalism Bishop and Green (2008), show how strongly motivated,
large donors have ‘set out to change the world’. They also argue for a greater role in philanthropy for all
citizens to address the problems of the world. In their view, as governments ‘cut back their spending on
social causes, giving may be the greatest force for societal change in our world’. Klaus Schwab,
Founder and Executive Chairman of World Economic Forum, says (Schwab, 2011):‘More than ever, the
new reality underscores the need to create new bonds rather than new boundaries. We need new
partnerships and alliances between public, private and civic life to tackle the problems that lie ahead.’

CREDITS BY: Trilochan Sastry

IN GOVERNMENT

Governments establish many regulations and policies that guide businesses. Some rules, like minimum
wage, are mandatory, while other policies may influence your business indirectly. Businesses need to be
flexible enough to respond to changing rules and policies. This is true not only at the national level but
more locally as well, as states and municipalities have their own sets of rules. Indeed, there are also
international treaties that can influence the way companies do business.

 Policy as a Market Catalyst

The government can implement a policy that changes the social behavior in the business environment.
For example, the government can levy taxes on the use of carbon-based fuels and grant subsidies for
businesses that use renewable energy. The government can underwrite the development of new
technology that will bring the necessary change. Imposing on a particular sector more taxes or duties
than are necessary will make the investors lose interest in that sector.

Similarly, tax and duty exemptions on a particular sector trigger investment in it and may generate
growth. For example, a high tax rate on imported goods may encourage local production of the same
goods. On the other hand, a high tax rate for raw materials hampers domestic production.

 Political Stability and Political Culture

Government policy will always depend on the political culture of the moment. Policy crafted in a
politically stable country will be different that formed in an unstable country. A stable political system can
make business-friendly decisions that promote local businesses and attract foreign investors.

Unstable systems present challenges that jeopardize the ability of government to maintain law and
order. This has a negative affect on the business environment.

 Government Taxation and Spending

Governments get money to spend from taxation. Increased spending requires increases in taxes or
borrowing. Any tax increase will discourage investment, especially among entrepreneurs, who take the
risks of starting and managing businesses. Increased spending also eats into the limited pool of savings,
leaving less money for private investment.

Reduction in private investments shrinks production of goods and services. That, in turn, may lead to the
elimination of jobs.

 Setting Interest Rates

Government policy can influence interest rates, a rise in which increases the cost of borrowing in the
business community. Higher rates also lead to decreased consumer spending. Lower interest rates
attract investment as businesses increase production.

The government can influence interest rates in the short run by printing more money, which might
eventually lead to inflation. Businesses do not thrive when there is a high level of inflation.

 Regulations and Permits

Trade regulations, the federal minimum wage, and the requirements for permits or licenses have effects
on business. For example, periodic health inspections must be carried out in all restaurants. Businesses
might spend a lot of money and time to comply with regulations that ultimately prove to be ineffective
and unnecessary. Fair and effective regulations, however, promote business growth.

CONCLUSIONS

It has always been a dream of mine to one day open and run a small business. I feel that I know myself
well, and that this career field would suit me best. Rather than have one large company that brought in a
sufficient income annually, I prefer to have multiple small businesses which in turn lead to large profit
margins. I get bored easily, and this variety of work will keep me motivated and happy through the rest of
my working life. However in order to achieve my life dreams of running these businesses, there are
certain steps I must climb first to accomplish my goals. I realize that education in this field is not a
necessity, but will go a long way on my journey to the top. I do however plan on graduating from the
Sumulong College of Arts and Sciences here at Antipolo City and making vast amounts of money within
seven years of my completion of senior high school and college.

REFERENCES

https://www.bworldonline.com

https://en-m.wikipedia.org

https://mathematics.svtuition.org

https://www.educba.com

https://investopedia.com

https://evolllution.com

https://smallbusiness.chron.com

https://googleads.g.doubleclick.net

https://businessmegaessays.com

https://grit.ph