internal sector

CHAPTER 11
Commerce 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
DISADVANTAGES
1. 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.

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?

Uuughhhhhhhhhh
h………?????

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

Now does any in this
class can explain
domestic trade
activities?

Msssss….Pppppuu
uuuuuffffffff ME
ME ME ME

All right then I
have no other
choice

Well domestic trade
involves 3 activites

Wholesale and retail
distribution system

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..???

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

Nuuuggghhhh squidy
don’t you get it?

Well its were marketers
are able to influence the
buying function

By determining the
changes in demand
products

And locating sources of
supply….

This upgrades the
performance off….

And at the same time adds
value to commodities

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…

We are almost there don’t
worry my Squidy

Patrick?! Are you still with
me?

Next is The wholesale and
retail distribution system

Retail is the sale of goods
and services from
individuals or businesses
to the end-user

Whole sale is the sale of
goods to anyone other
than a standard consumer

Sooo… what is merchant
middleman?

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 middlemen do not take
legal ownership of the goods
they sell; nor do they generally
take physical possession of
them

Well then that concludes
my discussion

I hope you folks learned …
atleast few ..

Well done sponge boy I’m
so proud of you

Due to that Be Ready
For A Quiz…..

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 balancefrom-total sale to the sellers.

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

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

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

113

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

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.

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.

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 Reyes
Father 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.

 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.

 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.

 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

 Refers to the economic

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

activities that circumvent
and evade the tax code.

Components of Informal
Sector
The Unrecorded
Economy

 This consists of economic

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

The Counter Trade or the
Sophisticated Version of Barter

 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.

internal sector

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