Lesson Plan 2 – Understanding the Organization Classifications and Its Sector or

Industry

An Organization- is an organized group of people….to achieve its VMGO.

Types of Organization:
Public, and -----service to public
Private or business ---provide goods and services at a profit

Business Organizations
Business organizations constitute a major component of the whole economy. They create
investments, employments, productions and incomes. In other words, they make and supply
goods and services to the economy. Evidently, such economic functions help the economy
move forward.

In a free-enterprise economy, private business organizations and the government are partners
of development and progress. The government provides the external economies of scale like
electrification, transportation and communication facilities, together with attractive government
policies and incentives. However, in highly developed countries like the United States and those
in Western Europe, private business organizations assume greater roles and responsibilities in
providing social and economic goods to people. Hence, proper management has been a top
priority. If many business organizations stop operating because they are losing, it does not only
adversely affect the owners but also their employees. Moreover, the whole economy is likewise
affected. There is a decline in national income.

Source: Review Guide on Basic Economics, Land Reform & Taxation (Soc. Sci 6) for
Midterm Examination. http://rggsocsci.blogspot.com/2012/02/review-guide-on-basic-
economics-land.html.

Classification of Orgn.
Forms of Business Organizations

Single or sole proprietorship. It is a form of business organization which is owned and

managed by one person.
Partnership. It is a form of business organization in which two or more persons agree to own
and operate a business. The partners agree to combine their resources (money, materials and
management). They also share their profits and losses. However, there are "silent" partners.
They only provide the financial capital but they do not participate in the management. There is
also the "industrial" partner. He does not contribute money to the business organizations but he
is responsible for its management.

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Corporation. It is a legal entity, distinct and separate from the individuals (stockholders) who
own it. The Corporation Code states "Corporation is an artificial being created by operation of
the law, having the right of succession and the powers, attributes, and properties expressedly
authorized by law or incident to its existence." Only natural persons are qualified to be
incorporators. They must not be less than 5 but not more than 15, all of legal age, and a
majority of whom are residents of the Philippines. Each incorporator of a stock corporation must
be an owner of at least one share of the capital stock.
Cooperative. Presidential Decree No. 175 defines a cooperative as "only organizations
composed primarily of small producers and consumers who voluntarily join together to form
business enterprises which they themselves own, control and patronize." A small producer is an
individual who provides (or together with his family) the primary labor requirements of his
business enterprise, or one who earns at least fifty percent of his gross income from his labor.

The Sizes of Business According to Assets and No. of Employees

The Micro, Small and Medium Enterprises (Intro to Entrep.)

Category Total Assets No. of Employees
Micro enterprise 3,000,000 or less 1-9
Small enterprise 3,000,001 to 15,000,000 10-99
Medium enterprise 15,000,001 to 100,000,000 100-199
Large Enterprise 200 and above

Types of Business Based on Primary Activities (Prin. Of Accounting book)

1. Servicing- renders service for a fee

2. Merchandising- buying and selling of goods
3. Manufacturing- converts raw materials into finished goods
4. Hybrid Business

Assign. # 2. Business Sector and Industry Classifications

A. Business Sector and Industry

 The North American Industry Classification System (NAICS) is the standard

classification system used by government agencies to organize companies into sectors
or industries.

Sector

- refers to a part of the economy in which a great number of companies can be categorized

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-industries are grouped together into sectors.
An economy can be broken down into about a dozen sectors, which can describe nearly all of
the business activity in that economy. Economists can conduct a deeper analysis of the
economy by looking at each individual sector.

There are four different sectors in an economy:

 Primary Sector: This sector deals with the extraction and harvesting of natural
resources such as agriculture and mining.
 Secondary Sector: This sector comprises construction, manufacturing, and processing.
Basically, this sector comprises industries that relate to the production of finished goods
from raw materials.
 Tertiary sector: Retailers, entertainment, and financial companies make up this sector.
These companies provide services to consumers.
 Quaternary sector: The final sector deals with knowledge or intellectual pursuits
including research and development (R&D), business, consulting services, and
education.

Examples.
telecommunications, transport, healthcare, and financials sectors
basic materials sector:
-includes companies that deal with the exploration, processing, and selling of basic materials
such as gold, silver, or aluminum.
Transportation sector:
-includes automobile manufacturing, train, trucking, and airlines industries.

Industry

- refers to a series of companies that operate in a similar business sphere. Industry

grouping is based on the primary product that a company makes are sells.
- Investors can easily compare companies within the same industry for investment
opportunities.
-

According to Encyclopedia Brittanica, the following are the classifications of industry.

Primary Industry- includes agriculture, forestry, fishing, mining, quarrying, and the
extraction of minerals.

1. genetic industry and production of raw materials

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 - include agriculture, forestry, and livestock management and fishing—all of which are
subject to scientific and technological improvement of renewable resources.

2. extractive industry and production of exhaustible raw materials

- include the mining of mineral ores, the quarrying of stone, and the extraction of mineral
fuels.

Secondary Industry-also called manufacturing industry, (1) takes the raw materials
supplied by primary industries and processes them into consumer goods, or (2) further
processes goods that other secondary industries have transformed into products, or (3) builds
capital goods used to manufacture consumer and nonconsumer goods. This also includes
energy-producing industries (e.g., hydroelectric industries) as well as the construction industry.

1. heavy or large-scale

generally requires heavy capital investment in plants and machinery, serves a large
and diverse market including other manufacturing industries, has a complex industrial
organization and frequently a skilled specialized labour force, and generates a large
volume of output.

Examples:

petroleum refining, steel and iron manufacturing, motor vehicle and heavy machinery
manufacture, cement production, nonferrous metal refining, meat-packing,
and hydroelectric power generation.

2. Light scale or small-scale industry.

- characterized by the nondurability of manufactured products and a smaller capital

investment in plants and equipment, and it may involve nonstandard products, such as
customized or craft work. The labour force may be either low skilled,

Example:

textile work and clothing manufacture, food processing, and plastics manufacture, or
highly skilled, as in electronics and computer hardware manufacture, precision
instrument manufacture, gemstone cutting, and craft work.

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Tertiary Industry-also called service industry, includes industries that, while producing
no tangible goods, provide services or intangible gains or generate wealth.

This include banking, finance, insurance, investment, and real estate services; wholesale, retail,
and resale trade; transportation, information, and communications services; professional,
consulting, legal, and personal services; tourism, hotels, restaurants, and entertainment; repair
and maintenance services; education and teaching; and health, social welfare, administrative,
police, security, and defense services.

financial sector broken down into several different industries such as:
banks, asset management, life insurance, or brokerages.
These industries can be further categorized into more specific groups.
example, the insurance industry can be broken up into different, specialized divisions like:
home, auto, life, malpractice, and corporate insurance.

B. Resources of Organizations
Any Organization has Resources (7M’s) to achieve its goals and objectives namely:
manpower (most impt. resource), money, machines, materials, methods, markets, moment
(time).
7M’s

- Money (capital)
- Men (employees, supervisor, managers)
- Machines (tools, equipment)
- Materials (raw, supplies, parts or ingredients)
- Methods (ways of doing or manufacturing product or service), “SOP”
- Markets (customers & distributors)
- Moments (time)

Four types of assets or Resources:

Human resources refer to managerial talent, labor (managerial talent, labor, and
services provided by them),

In HRM subject, Individuals with talents, capabilities, experience, professional expertise,

relationships, etc.

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Monetary or Financial resources (the monetary investment the organization uses to
finance its current and long-term operations), Cash, financial resources, stocks, financial
securities, etc.

Physical resources (raw materials, physical and production facilities and equipment)
Buildings, land, furniture, computers, vehicles, equipment, etc.

and
Intangible resources (information, data and other kinds of information, Methods or
processes) These are also the Specialized research capabilities, patents, information systems,
designs, operating processes, etc.