Nature of business
Organizations designed to provide goods and/or services to consumers and clients are a business or an enterprise (a particular company or corporation). Business is defined as the economic activities for the purpose of securing profits or of acquiring property rights.
In capitalism, most businesses are privately owned and formed to earn profit, actively engaging in commercially viable and profitable work. Profit increases the owner's wealth and expands the business. A focused business act in a particular market sector and engages in activity by the community of suppliers of the respective goods and services. Capitalist business owners and operators focus on the generation of financial returns in exchange for work and acceptance of risk.
Science of business
Business is an art. But it has its corresponding science. The science of business is the systematically arranged knowledge which experience has taught us to apply in our activities if we would be successful. It behooves every man and woman in business, then, to learn something of this most universally useful of all sciences, the science of business. It consists of three parts, termed, for the want of better names:
- Environment of business
- Functions of business
- Kinds of business
Some entruprenuers will need to know more about certain parts of the science than will others, or than they themselves will need to know about other parts of the science.
The environment of business
All activities of man are interrelated. There is hardly any branch of human knowledge that does not have a potent effect somewhere in business dealings. But there are certain branches of knowledge which have direct and almost universal application in business matters. These branches are called the environment of business. The business man must lay the roots of his special training in business science and practice in an understanding of the pure sciences, natural sciences, and social sciences.
- Pure sciences — Logic, Mathematics.
- Natural sciences — Physics, Chemistry, Astronomy, Geology, Biology, Botany and Zoology.
- Social sciences — History, Economics, Politics, Jurisprudence, Sociology, Psychology, Ethics and Philology.
You cannot study business without learning something about other matters. Some activities are fairly selfcontained. One doesn't need a wide range of learning. True, one might make a very deep study of the mathematical science to the study of science, but the study would be of relatively small practical advantage. On the other hand, in some activities a fairly wide range of knowledge is directly helpful. The more one knows of subjects and the more subjects he knows at least something about, the better he will be.
Functions of business
Business itself consists of the production of goods and commodities, and of their transportation and exchange. To study these things is to study business itself. As was stated in the preceding section, we cannot study any one of these processes without gradually working off into other sciences. But there are certain features of business peculiar to itself, which features, taken together, we may call the functions of business. In a rough way, these functions may be divided into four parts called production, marketing, financing and accounting. There may be elements of the science of business which are generally recognized as parts of the science of business but which cannot easily be fitted into any one of these four functions.
Administration is nothing other than a composite of the four functions. We may define it as that department of business which directs the four functions of producing, marketing, financing and accounting. If we regard it in this light, administration does not require a separate treatment.
Production includes the study of the organization and management of the processes required to transform raw material into useful commodities and simple energy into useful services.
Marketing includes the study of all the means whereby goods are exchanged and transported from one owner to another.
Financing, in a sense, is not a true function of business, since it merely facilitates production and marketing; and the same may be said of accounting. Financing, however, may be defined as that function of business which facilitates production and marketing through the use of funds.
Accounting may be said to be that function of business which analyzes the other functions and properly records the results of the analysis to the end that those other functions may be intelligently carried on.
A trained business man ought to understand the kinds of businesses, and their peculiar principles, in a broad outline. Understand the principles which govern those undertakings with which are likely to be encountered. And again, other businesses should be studied, not because they enter directly into the lines and activities of a great many people, but because their processes are so old or are conducted on such a large scale that they must become a matter of interest to every well-informed man.
- Selfishness and to self-seeking activity
Two persons coming into business relations. Each has services and property — either or both — to sell.
The process of bargaining takes place through appeals to the intellect (arguments) and to the emotions (persuasion), the purpose being to overcome the will and to cause the person to act in respect to his property or services. This is the modern stage of business — sometimes called the credit stage. It also covers the next earlier stage of business called the money stage.
Economics is 'the social science of business' (social aspects) and the "science of business" is activity of 'making profits and acquiring property rights'.
- See also: Non-business activity
Entrepreneur are interested in making profits, but must not injure the public good. In the long run, the entrepreneur who makes business conform to current social ideas on what is good and what is bad for society, will make the most profits. Indeed, it may be insisted that profits acquired by practices contrary to recognized current social standards are not "profits" but "loot."
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