CHAPTER 11Commerce and Industry

THE SCOPE OF COMMERCE AND INDUSTRY

The industry Sector

Agricultural sector produces the food we eat, the

raw materials for the clothes we wear and the

houses we live in.

Service Sector of Industry includes the following:

1. transportation, communication, and storage

2. Trade

3. Finance

4. Ownership of dwellings and real estate

5. Private services

6. Government services

Manufacturing

The chemical transformation of organic and inorganic matter into finished products, either by the use of machines or by hand., at a place like a factory or at home.

Mining and Quarrying

These are industries which extract minerals and other precious metals from the country’s mineral resources.

Construction

These refers to buildings, factories and other structures. They are fixed capitals wherein manufacturing and transactions are carried out.

Electricity, Gas and Water

These are usually termed as WIP-water, illumination and power which are very necessary to carry out production.

Business and Commerce Sector

Commercial activities are usually undertaken by business organizations ranging from the simple sole proprietorship to the complex corporations.

CONTRIBUTION OF COMMERCE AND INDUSTRY TO

GROWTH AND DEVELOPMENT

MAJOR FORMS OF BUSINESS

ORGANIZATIONS

Sole Proprietorship

-simplest of the three forms of business organizations. Such is owned and operated by a single person.

ADVANTAGES

1. The desire to be one’s own boss-shouldering the responsibilities and making all the decisions.

DISADVANTAGES

1. Responsible for all business debts.

2. Limited resources which also limit the possibilities of expansion.

Partnership

-owned by two or more people who agree to pool their

resources in a common fund with aim of sharing whatever profit

or losses they will get from their partnership.

ADVANTAGES

1. In the Philippine laws, partnership is recognized as a legal

person.

2. It has a better chance of succeeding due to availability

of expertise.

DISADVANTAGES

1. Has unlimited liability.

2. Disagreements

Corporation-a business organization that produces the biggest

percentage of goods and services today.

*Stockholders

-owners of the corporation

ADVANTAGES

1. Owners have limited liability.

2. Can raise huge amounts of capital for the business through the sale of stocks.

3. Unlimited life

DISADVANTAGES1. Managers who are stockholders may not have the

interest of the welfare of the business at heart.

2. Payment of profits in the from of dividends which are taxed twice.

Cooperative

-an organization or business enterprise owned, patronized

and managed by its members.

Kinds of Cooperative

1. Consumers’ Cooperative.

-organized by the members of a group who pool their

resources together to put up a business managed, operated, and

owned by the members themselves.

2. Producers’ Cooperative.

-when people join together and pool their capitals, buy

land, sell their own products out of their produced goods, then

these people are forming a producers’ cooperative.

3. Formers’ Cooperative.-considered as a business enterprise owned and

operated by the farmers.

KINDS OF FARMERS’ COOPERATIVE.

1. Farmers’ Cooperative Marketing Association (FACOMAS)

-the problems of the farmers center on the marketing of farm goods.

2. Samahang Nayon-organization of farmers in a barrio.

3. Kilusang Bayan-a cooperative.

*Credit Union- cooperative association organized by a group of people with a common goal or thrift.

Savings function- the member is encouraged to save by opening savings account.

Credit function- has two kinds:

a. Provident loan- given for emergency purposes

b. Productive loan-used for capital that can give the member an income.

DIFFERENT FUNDINGS OF A CREDIT UNION

1. Fixed deposits

-when the member joins the credit union, he gives a certain amount which is fixed by the board of

union.

2. Savings deposits

-the member is encouraged to deposit to the

credit union in the form of savings deposit.

3. Fees and Fines

-taken from the members in the form of service

fee, membership fee and fines.

4. Reinvestment of Patronage Fund

-at the end of each year the members of the

credit union receive a patronage dividend.

5. Interest

-comes from loans given to members.

Internal and Informal Sectors

Okay class today we will study about domestic trade

activities

Hahahha domestic trade

puffffff……@3%*&$@#

Okaaaaayyyyyy……. That’s enough

Patrick , can you explain domestic trade activities?

Uuughhhhhhhhhhh………?????

That’s what you get when you don’t study your

lessons

Now does any in this class can explain domestic trade

activities?

Msssss….Pppppuuuuuuuffffffff ME

ME ME ME

Anyone?

Ugghhhh

All right then I have no other

choice

SPONGEBOB

Well domestic trade involves 3 activites

Marketing of goods

Wholesale and retail distribution system

And Distribution of products

Well done ….

So I guess you’ve read our lesson for today

very well…

Sooo… can you discuss everything for today??

Are you sure of that Mrs. Puff..???

Are you sure of that Mrs. Puff..???

Are you sure of that Mrs. Puff..???

Do I look like kidding??

Economics Class starts now!!!

Professor Spongebob is in the house !!!

Okaay so lets start with Exchange function

Exchange function includes buying and selling

through the market channel

Wherein sellers and buyers meet and bargain

SSSSOOOOOO???!!

Nuuuggghhhh squidy don’t you get it?

Do I look like ??

Well its were marketers are able to influence the

buying function

By determining the changes in demand

products

And locating sources of supply….

That’s awesome

Next is physical function

Hhhooooorrrraaaayyyy!!!

Ssoooo what's that?

Weellllll….

This upgrades the performance off….

Marketing

And at the same time adds value to commodities

That the consumers purchase

Well said spongebob

Continue…

Next is the facilitating function

Uuuhhhhh that’s sometthing sweet squidy

Trying to understand even though YOU CAN’T

*@#@#$#%$#$#$^%&^%^#$%$#%&

*&^!!!!!

Nowww this is concerned with standardization ,

financing, risk bearing And…..

Market information of nearly all commodities in

the market…

zzzzzzzzzzzzzzz…….

SQUIDWAAAARRRRDDDDDDD!!!!!

Listen to Spongebob

Pfffttt…. !!#@!$!@##$@!

We are almost there don’t worry my Squidy

We’re almost finish

Patrick?! Are you still with me?

DO YOU STILL GET ME?!

I assume that’s a YES

Soo now lets proceed

Go on dear :>

Next is The wholesale and retail distribution system

Its just simple …

Retail is the sale of goods and services from

individuals or businesses to the end-user

Retail is the sale of goods and services from

individuals or businesses to the end-user

And

Whole sale is the sale of goods to anyone other

than a standard consumer

Whole sale is the sale of goods to anyone other

than a standard consumer

Sooo… what is merchant middleman?

Hmmmm….. That’s simple

a middleman who takes title to goods purchased

for resale

Like him , he is the one in charge with the

transactions happening with the buyer and the

seller

Agent middleman

agent middlemen do not take legal ownership of the goods

they sell; nor do they generally take physical possession of

them

Like Them….

Well then that concludes my discussion

I hope you folks learned … atleast few ..

Well done sponge boy I’m so proud of you

Its over …. At last….

Due to that Be Ready For A Quiz…..

232-237

Telle

Agent Middlemen

• Carry out negotiations for the negotiations for the transfer of goods and services.

• Do not buy or sell goods; they only help in facilitating the transfer of such goods from sellers to buyers.

Brokers

•Gather is to gather the sellers and buyers where negotiations for purchases or sales of goods can take place.

Commission Men

•May get the products from agricultural producers and sell them in the form of balance-from-total sale to the sellers.

Speculative Middlemen

• They take the risks of taking commodities despite possible loss due to price fluctuations.

Types of Retail Business

General Merchandise Store

• These are the stores that offer a wide variety of goods for sale.

113

Department Stores

• Defined as a retail establishment that employs at least two or more, has sales of apparel and soft goods.

a. furniture, home furnishings, appliances, radio and TV sets

b. general apparel for the family; and

c. household lines and dry goods

Discount Department Store

• Sells limited assortments of merchandise at reduced prices is called a discount store.

• Began in the 1930s.

Variety Stores

• Designed to enable the customer make his purchases with a little or no assistance from store personnel.

General Store

• Served as a post office, a tavern, an inn and the center of socialization among rural folks.

• Supplies groceries, hardware and some other inexpensive items to the consumers of the rural communities.

Limited-Line Store

• Sells only one classification of merchandise.

• Offer a wide assortment of the goods they carry, supply sound product information, and provide efficient service.

Non store Retailing

Direct Selling

•Done by marketing of goods directly to the house.

•Includes cosmetics, encyclopedia, and cookware.

Mail-Order Retailing

• Sells through the use of catalog or pamphlet that describes its goods in detail.

• Established catalog centers which contain only catalogs for the customers to choose their purchases.

Machine Vending

• Can be found anywhere you go. Candy, drinks (hot or cold), and ice cream are the most common items sold.

• Consumers are willing to pay extra for the convenience of having supplies readily available.

Retailing Services

Restaurant Services

•Food service industry is growing because more and more people are interested in eating out.

•Success of the different chains of eateries like Jollibee, McDonald’s, Wendy’s and the like can testify to this.

Lodging Services

• People who travel extensively for both business and pleasure find it easy to rent a space for lodging either in a hotel, hostel or pension house.

Financial Services

• Offered by the different financial institutions such as banks, savings and loan associations, insurance companies, stockbrokers, small loan companies and finance firms are demanded by the consumers.

• Provide them with the information involved in carrying out the services they offer.

Recreation and Tourism Services

• Most popular types are bowling lanes, golf courses, theaters, recreation centers, bookstores, pet shops, music stores, travel agencies, and video houses.

Transportation Services

• Main function of airlines, rail roads, bus companies, jeepneys and shipping lines is to transfer the customer from one place to another.

• Provide accommodations, arrange space, sell tickets, and make adjustment in itineraries.

Personal Services

• Concerned with personal care.

• Barber shops, beauty parlors, photography studios, and dance studios are examples of this kind of retailing.

Repair Services

• Offer repair services such as on watches, cars, television sets, appliances.

• Many have established repair sections to answer the needs of the customers.

Importance of Retail Trade

1. Retail trade serves as intermediary between the final consumers and manufacturers.

2. Retail trade brings about a balance in the exchange within the economic system.

3. Retailers assume the risk by buying merchandise without any guarantee that all the products bought will sell.

4. Retailers extend credit to the consumers to be able to sell the products.

5. Retailers bring buyers and merchandisers together by purchasing products in large lots.

6. Retailers provide customers with a wide range of choice of goods and a quick delivery of products to the consumers.

7. Retailers attract consumers through advertising and other types of promotions.

8. Retailers provide producers with useful information on consumer buying habits.

9. Retails can encourage or discourage the sale of certain products.

10. Retail trade is the shortest distance between the manufacturer and consumer.

Nationalization of the Retail Trade

Pursuant to the provisions of Republic Act No. 1180 known as the Retail Trade Nationalization Law as amended by Presidential Decree No. 714, section 79 (B) of the Revised Administrative Code, retail business is defined according to the following:

1. Retail business shall mean any act, occupation or calling of habitually selling directly to the general public merchandise, commodities or goods for consumption, but shall not include:

a. Sales by a manufacturer, processor, laborer or worker to the general public the products manufactured, processed or produced by him if his capital does not exceed five thousand pesos.

b. Sales by a farmer or agriculturist of the product of his farm.

c. Sales by a manufacturer or processor, in the Philippines or its subsidiary affiliate company, to industrial, commercial and agricultural users or consumers who use the products bought to

render service to the general public or to produce or manufacture goods which are in turn sold by them in accordance with the Retail Trade Nationalization Law.

d. Sales by a hotel owner, keeper, lessor or concessionaire, and lessee operating a restaurant, irrespective of the amount of capital provided that the restaurant is necessarily included in, or incidental to the hotel business.

e. Sales by a manufacturer or processor to the government and its agencies, including government-owned and controlled corporations.

f. Sales at wholesale.

History of the Nationalization of Retail Trade

The movement to nationalize the retail trade started in 1900 to 1929. Although there were no concerted efforts for its full implementation, it paved the way for a more sustained movement to nationalize the retail trade.

The most important factors which led to nationalization of the retail trade in the country are the following:

1.Chinese control of the retail trade

2.Rise of economic awareness

3.Development of education, system of transportation and communications.

4.Rise of nationalism.

The need to nationalize the retail trade gathered momentum in 1930 to 1944. Organizations such as Ang Bagong Katipunan were established to strengthen the movement.

It was only between 1945 and 1953 that Congress was convinced of the urgency and necessity of the matter.

Several Filipino groups were organized to enhance its full implementation.

The most important of these groups are the:

Filipino Retail Business Movement (FILREMO)

United Filipino Retailers Cooperative Association (UNIFIRCA)

Nationalization Movement of the Philippines (NMP)

Philippine Chamber of Commerce

Pagkakaisa at Tangkilikan

National Economic Protectionalism Association

Pera-pera Movement of 1938

Filipino Retailers Merchants Association of 1948

Dionisio ReyesFather of FILREMO Considered the most persistent advocate of

the Retail Trade Nationalization Act, he was even called the Father of the Retail Trade Nationalization Movement.

Through an agreement called the Cuenco Resolution, the delegates of the constitutional convention were convinced that Congress was authorized to pass a law which nationalizes the retail trade.

It was under the administration of President Ramon Magsaysay when House Bill No. 2523 was approved and finally Republic Act 1180 became a reality.

It was that beginning May 15, 1954, “no alien and no association not wholly controlled by Filipino citizens can be permitted to engage in the retail trade in the Philippines.”

Meaning, that those aliens and associations already engaged in retail trade on or before May 15, 1954 may continue their business.

It is further stated that alien retailers who were allowed to engage in retail trade because they were actually engaged in this business on or before May 15, 1954, shall not be allowed to establish or open new stores or branches.

Distribution of Products for Local Consumption

Coastwise Trade The transport of goods

from one port to another within the country.

Local ports such as Bataan and Manila are considered two of the five busiest coastwise trading centers. Other busy ports are in Cebu, Davao and General Santos

Airway Trade

The movement of goods from one airport to another within the country.

Large and busy airports are in Mindanao and National Capital Regions

Railway Trade

Consigned commodities transported through the railroad.

The province of Bicol registered the largest percentage of outflows as well as inflows, with the NCR in close second.

Problems of Domestic Trade

Lack of capital curtails further production of goods and services and this situation militates against the primary function of distribution which is to increase consumer welfare.

Financial restraints often force wholesalers and retailers to stop their business, thus resulting to a lag in the system of distribution.

The marketing of commodities is very crucial to the whole system of exchange.

Promotion of Domestic Trade

Fielding of rolling stores in areas affected by Mt. Pinatubo eruption like Tarlac, Pampanga, and Zambales. This is to ensure the continuous supply of basic commodities it wholesale price.

Mobilization of food caravans which deliver meat, fruits, fish and vegetables from the provinces to the various wet markets in Metro Manila.

Promotion of Domestic Trade

Continuous supply of basic commodities at reasonable prices in depressed areas of the country through the establishments of 142 Bantay Bilihin Tindihan.

Establishments of “bagsakan” centers for fresh fruits and vegetables in Quezon City and in Manila.

Promotion of Domestic Trade

Buying at wholesale activities for some selected items such as sugar, flour, hardware and cement, including purchase of goods for the relief operations of DSWD under the “Hatid Butil” and “Hatid Liempo” projects.

Agencies that Promote Domestic Trade

Bureau of Trade Regulation and Consumer Protection

Bureau of Domestic Trade Promotion

Bureau of Patents, Trademarks and Technology Transfer

Bureau of Product Standards

Videogram Regulatory Board

Laws that Promote Domestic Trade Consumer Act of the Philippines

RA No. 6969 known as Toxic Substances and Nuclear Waste Control Act

Senate Bill 1556

House Bill No. 554

The Informal Economic Sector or Underground Economy

Professor Edgar L. Leigs says that the underground economy or the informal economic sector does not only exist in underdeveloped nations, but also exists in industrialized and progressive countries like the United States.

Components of the Informal Sector

The Illegal Economy The Unreported Economy

It consists of activities which are pursued even if they violate legal statutes that define the legitimate forms of commerce.

Refers to the economic activities that circumvent and evade the tax code.

Components of Informal SectorThe Unrecorded Economy

The Counter Trade or the Sophisticated Version of Barter

This consists of economic activities that should be recorded in national accounting system but is not fully or properly recorded.

This may be considered an informal economy due to the minimum use of foreign exchange.

Why does Underground Economy Exist?

Costly regulations

Rising Taxes

A growing distrust in government especially with the increasing rate of graft and corruption

Counter trade ensures that developing countries such as the Philippines will have a lesser need to borrow from multilateral institutions like the IMF in order to import more goods and services from other countries.

State of Underground Economy in the Philippines

In the February 1994 issue of Recent Economic Indicators, they analyzed the currency in circulation which in real terms increased by about 52.7% while real GNP increased by only 17.7% over a 13 year period. On the assumption that the informal sector started from 0 in 1980 and that the velocity of money has been constant, they calculated that the size of the informal economy in 1992 relative to GNP was about 30%.

Underground Economy and Its Effects on the Nation’s Economy

Underground Economy contributes to the noncollection of taxes due the government and leads to the continuous violation of economic laws and regulations.

Undergrounds Economy breeds lawlessness or disregard for law and order.