Transcript THE NATURE OF SMALL BUSINESS

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Business – An organized effort of individuals
to produce and sell goods and services in order
to satisfy the needs of the society.
- The primary objective of business is
to acquire profit.
Small Business – Owned by the principal
worker, and employs one or more assistants.
(micro business)
- Owner mainly directs the
work of the employees.
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Small and Medium Enterprise (SME) – are
defined as any business activity or enterprise
engaged in industry, commerce, agribusiness
and/or services, whether single proprietorship,
partnership, cooperative or corporation, whose
total assets, inclusive of those arising from
loans but exclusive of the land on which the
particular business entity’s office, plant and
equipment are situated must have value falling
under the following categories:
SMALL AND MEDIUM
ENTERPRISE CATEGORY
AMOUNT OF CAPITALIZATION
Micro Enterprise
Less than Php 3 Million
Small Enterprise
From Php 3M to Php 15M
Medium Enterprise
From Php 15M to 100M
Large Enterprise
Php 100 Million and above
(redefined the categories) Republic Act No. 9170
otherwise known as the Barangay Micro Business
Enterprise (BMBE) Act of 2002
SMALL AND MEDIUM
ENTERPRISE CATEGORY
EMPLOYMENT SIZE
Micro Enterprise
Less than 10 employees
Small Enterprise
From 10 to 99 employees
Medium Enterprise
From 100 to 499 employees
Large Enterprise
500 employees and above
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Small Manufacturing Business
Small Service Business
Wholesaling
Retailing
General Construction Firms
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Small Manufacturing Business
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A manufacturing business is involved in the
conversion of raw materials into products needed by
society.
Small Service Business
Business services – provide service to other
business.
Examples: janitorial/security services,
collection agencies
Personal services – provide service to a person.
Examples: tutoring, massage parlors, voice
lessons
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Small Service Business
Repair Services – provide repairs to owners of
various machinery and appliances.
Examples: auto repair shop, watch repair,
plumbing
Entertainment and recreation – includes movie
houses, resorts, billiard pool centers, bowling
centers.
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Small Service Business
Hotels, motels, and inns
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Education services – include Montessori school
for children, high school, correspondence schools.
Wholesaling
Wholesaling refers to the activities of persons or
establishments which sell to retailers and other
merchants, and/or to industrial, institutional, and
commercial users, but who do not sell in large
amounts to final customers.
Examples: soft drinks wholesalers, dealers of
supplies and office equipment
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Retailing
Retailing cover all activities involved in the sale
of goods and/or services to the final consumers.
Examples: retail drug stores, fast-food shops,
appliances stores etc.
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General Construction Firms
Engaged in construction of buildings
whether for private individual firms, or for the
government. Many of them perform
subcontracting jobs for bigger contractors such as
installing electrical facilities and sewerage.
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General Construction Firms
Engaged in construction of buildings
whether for private individual firms, or for the
government. Many of them perform
subcontracting jobs for bigger contractors such as
installing electrical facilities and sewerage.
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A small business is low in capital but high in
labor intensity.
A small business is efficient in specialized skill
or service.
A small business succeeds in small, isolated or
overlooked markets.
A small business often operates in unstable
markets.
A small business is closer to the market place.
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Generally, the owner of the small business are
also the managers.
Capital comes from the owner or small group
The area of operation is small.
The size of the enterprise is small in relation to
the industry.
Small businesses play an important role in
the development of our economy. They
assume the following function:
1. Provides economic opportunities for
entrepreneurs – People who do not feel
comfortable as employee have the option of
engaging in small business operation.
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Small businesses play an important role in
the development of our economy. They
assume the following function:
2. Provides of product and services to consumers
– the production of many products and services is
oftentimes feasible with big and medium business
operation. These limited opportunities are
naturally fitted for a small business.
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Small businesses play an important role in
the development of our economy. They
assume the following function:
3. Suppliers of products and services to other
businesses – some businesses require raw
materials, semi-finished parts, finished
components, or even labor, which they cannot
economically produce. The small business
perform this for them.
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Small businesses play an important role in
the development of our economy. They
assume the following function:
4. Distributors of products and services of other
businesses – some manufacturers do not have the
ability to distribute their products and services.
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Small businesses play an important role in
the development of our economy. They
assume the following function:
5. Supporters of Government – small businesses
support the government with the taxes they pay,
as well as performing other functions.
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Small businesses play an important role in
the development of our economy. They
assume the following function:
6. Providers of employment – a large proportion
of the labor force are employed by the businesses.
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EMPLOYMENT AND SMALL BUSINESS OPERATION COMPATED
FACTOR
SMALL BUSINESS
OPERATION
EMPLOYMENT
INCOME
Uncertain
Certain
CAPITAL
INVESTMENT
Risk of losing
None Required
QUALITY OF LIFE
Lower until business
gets established
Consistent at a certain
level
RESPONSIBILITY
Complete/ all
encompassing
Restricted to one’s job
Gain control over his
own country
Present
Absent
Reach his full potential
Present
Absent
Reap unlimited profits
Present
Absent
Make a contribution to
society
Present
Limited
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Personalized relationships with customers and
employees
Flexibility in management
Government incentives
Simple record keeping
Independence
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Difficulty in raising capital
Risk of failure
Limited management skills
Lack of opportunities for employees
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Barangay Micro Enterprises Act
The Anti-Dumping Act of 1999
Consumer Act of the Philippines
Electronic Commerce Act of 2000
Price Act
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Others
Tobacco Regulation Act of 2003 (RA 9211)
 Export Development Act (RA 7844)
 Foreign Investment Act (RA 7042)
 Retail Trade Liberalization Act (RA 8762)
 Safeguards Measures Act
 Transaction Value Act
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“Barangay Micro Business Enterprise”
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It is hereby declared to be the policy of the State to
hasten country’s economic development by
encouraging the formation and growth of BMBEs
which effectively serve as seedbeds of Filipino
entrepreneurial talents, and integrating those in the
informal sector with the mainstream economy,
through the rationalization of bureaucratic
restrictions, the active intervention of the
government specially in the local level, and the
granting of incentives and benefits to generate
much-needed employment and alleviate poverty.
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“Barangay Micro Business Enterprise”
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Engaged in the production, processing or manufacturing
of products or commodities
Whose total assets shall not be more than Three Million
Pesos (Php 3,000,000)
Services – excludes exercise of profession duly licensed
by the government
Certificate of Authority
Assets – all kinds of properties, real or personal owned
and/or used by the BMBE for the conduct of its business
Where to register: Office of the Treasurer of each city or
municipality
Fee: not to exceed One Thousand Pesos (P 1,000)
Effectively: 2 years renewable for a period of 2 years for
every renewal
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“Incentives and Benefits”
Exemption from Taxes and Fees
 Exemption from the coverage of the Minimum wage
law Credit Delivery
 Technology transfer, production and management
training and marketing assistance
 Trade and investment promotion
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The Anti-Dumping Act of 1999
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Whenever any product, commodity or article of commerce
imported into the Philippines at an export price less than its
normal value in the ordinary course of trade for the like
product, commodity or article destined for consumption in the
exporting country is causing or threatening to cause material
injury to a domestic injury, or materially retarding the
establishment of a domestic industry producing the like
product, the Secretary of Trade and Industry, in the case of
non-agricultural product, commodity or article, after formal
investigation and affirmative finding of the Tariff Commission,
shall cause the impositions of an anti-dumping duty equal to
the margin of dumping on such product, commodity or article
and on like product, commodity or article thereafter imported
in the Philippines under similar circumstances, in addition to
ordinary duties, taxes and charges imposed by law on the
imported product, commodity or article.
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Consumer Act of the Philippines (Republic Act
No. 7394)
Products the interest of the consumer, promotes his
general welfare and establishes standards of conduct for
business and industry.
a. Protection against hazards to health and safety;
b. Protection against deceptive, unfair and conscionable sales
acts and practices;
c. Provision of information and education to facilitate sound
choice and the proper exercise of rights by the consumer;
d. Provision of adequate rights and means of redress; and
e. Involvement of consumer representatives in the formulation
of social and economic policies.
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Electronic Commerce Act of 2000 (Republic Act
No. 8792)
Provides for the legal recognition and admissibility of
electronic data messages, documents and signatures.
 Mandates all government department and offices to
accept electronic data messages and documents in their
transactions within two years from its effectively.
 Provides for penalties on computer hacking, introduction
of viruses and piracy of copyrighted works of at least P
100,000 and maximum commensurate to the damage
incurred, and imprisonment of six months to three years,
among others;
 Promotes e-commerce in the country, particularly in
business-to-business and business-to-consumer
transactions.
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Price Act (Republic Act No. 7581)
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Protects consumers by stabilizing the price and supply of
basic necessities and prime commodities without denying
legitimate business a fair return an investment and by
prescribing measures against undue price increases
especially during the emergency situations and similar
occasions.
Tobacco Regulation Act of 2003 (RA 9211)
Enacted to protect the populace from hazardous products
and promote the right to health and instill health
consciousness among them.
 Safeguards the interests of the workers and other
stakeholders in the tobacco industry.
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Main thrust of RA 9211
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Promote a healthful environment
Inform the public of the health risks associated with cigarette
smoking and tobacco use
Regulate and subsequently ban all tobacco advertisements and
sponsorship;
Regulate the labeling of tobacco products;
Protect the youth from being initiated with cigarette smoking
and tobacco use by prohibiting sale of tobacco products to
minors;
Assist and encourage Filipino tobacco farmers to cultivate
alternative agricultural crops to prevent economic dislocation;
and
Create a inter-agency committee on Tobacco (IAC-Tobacco) to
oversee the implementation of the provisions of this Act.
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Export Development Act (RA 7844)
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Aims to develop the country’s export sector and
meet the country’s export goals.
Puts into focus a national strategy for a sustainable
agri-industrial development to push the Philippines’
image as a newly industrialized country.
Enjoins the government and the private sector to
consolidate efforts to promote exports and expand
the country’s share in the international markets by
promoting industries that are considered export
winners.
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Foreign Investments Act (RA 7042)
Recognizes the role extent played by foreign
investments in the economy, and sets into place the
procedures for the registration and grant of
incentives to foreign investors.
 Specifies the limits on the extent of allowable foreign
ownership
 There are no restrictions on foreign ownership in
export and domestic market enterprises, but a
Foreign investment Negative List or Negative List
defines the areas of economic activities where
foreign ownership is limited.
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Foreign Investments Act (RA 7042)
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Former natural-born Filipinos are granted the same investment
rights of a Philippine citizen based on existing investment and
related laws. However, former natural-born Filipinos are
restricted in cone areas such as defense-related activities,
exercise of profession, activities covered by the Retail Trade
Act, Small Scale Mining Act, Rice and Corn industry Act and
other laws.
Foreign Investment List
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No foreign equity is allowed in mass media; services involving
the practice of professions, such as engineering, medical and
allied profession, accountancy, criminology, architecture, law,
etc.; retail trade; cooperatives; small-scale mining, utilization of
marine resources; ownership and operation of cockpits;
manufacture, repair of nuclear weapons and other biological,
chemical weapons, etc.; and other areas.
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Foreign Investment List
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Up to 25 % foreign ownership is allowed for private
requirement, whether for local or overseas employment;
locally-funded public works, except for
infrastructures/development projects and foreign-funded or
assisted projects.
Up to 30 % foreign equity is allowed in advertising
Up to 40 % foreign equity for exploration, development and
utilization of natural resources; ownership of private lands;
operation and management of public utilities, educational
institutions; rice and corn administration; contracts to supply
materials, good and commodities to GOCCs; project proponent
of a BOT project in public utilities; deep-sea commercial fishing
vessels operation and condominiums.
Up to 60 % ownership in financing companies regulated by the
SEC and investment houses.
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Safeguards Measure Act (RA 8800)
Contains measures to protect local manufactures
from trade practices tat are seen as unfair. It
provides relief to domestic industries when a sudden
increase in imports adversely affects local industries.
 The government can levy a higher tariff an imports
of agricultural products once these breach a certain
volume or price, protecting local farmers growing
the same products.
 Also provides an adjustment period for the
agricultural sector to become competitive, as well as
adjustment plans for other affected sectors to help
enhance competitiveness.
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Transaction Value Act (RA 8181)
Changes the basis of dutiable value of imported articles
subject to an ad valorem rate of duty from Home
Consumption Value (HCV) to Transaction Value (TV).
 The price actually paid or payable for goods that are
exported to the Philippines.
 The price that appears on the accompanying commercial
or sales invoice issued in the country of origin or
exporting country.
 The TV system enables local manufacturers or producers
to price their export products more competitively and
allows Philippines to align its valuation system not only
with its ASEAN neighbors but also with the rest of the
world.
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