introduction to business essay

introduction to business essay

Introduction to Business: A Comprehensive Overview

1. 1. The Importance of Business in Society

Clearly, not all business is conducted in the same way. Some business organizations are small, single-unit establishments engaged in providing goods and services to local consumers. Others are enormous organizations—conglomerated systems of hundreds or even thousands of managers and employees—conducting business in transportation, mining, manufacturing, retailing, communication, and much more. Some are government regulated; others have considerable freedom in determining how their activities should best be conducted. Some systems are cooperatively owned by those who benefit from their services. Some business organizations exist solely to earn a profit; others to meet the needs of their owners. In general, business activities can, and do, take many different forms. In large and small ways, business affects everyone. At the same time, individuals have a profound effect on the nature of such business.

Business touches every aspect of the modern world, whether farming in rural Oregon, drafting new accounting standards in Paris, selling homes on the Florida coast, working to expand international trade, coordinating activities of over a hundred-thousand employees, managing raw materials and production on a Caribbean island, building information systems, helping students afford college, solving marketing or production problems, counseling with troubled employees, or obtaining financing. The list goes on and on. Businesses produce and distribute most of the food we eat, the cars we drive, the clothes we wear, and the computers we use. Businesses furnish our homes, entertain us, and provide our social needs. It is impossible to think of any activity or institution that does not in some way involve business. At its most basic level, business is all about the production of goods and services in order to make profit, which in turn serves human needs and wants. In this sense, the study of business is vitally important.

2. 2. Key Concepts and Principles of Business

Economic systems. Countries are classified into three broad categories: capitalist, socialist, and mixed economies. Most countries in the western world are classified as capitalist countries due to their commitment to: 1) private ownership of the major means of production (resources); 2) reliance on markets to allocate goods and resources; 3) decisions made by individuals acting in their own best interests; 4) freedom of enterprise and choice; and fair competition. Socialist countries represent other extremes where the state usually makes most economic decisions. Mixed economic systems contain elements of both systems. Due to the interaction of political, economic, and social systems, countries may be changing their classification types. For example, Russia and many eastern European countries abandoned their socialist system with the political changes in the early 1990s and are in the process of adopting capitalism.

There are quite a few important concepts and principles which form the foundation of modern business thinking. As a student of business, you will be introduced to these concepts and principles in different forms and at various times. However, we address them briefly here as a review of some general organizational principles before moving on to further detail in other chapters.

3. 3. Types of Business Organizations

A partnership, like a sole proprietorship, is relatively simple to form and operate. It is a business that is equally owned and actively managed by two or more people. Many law firms, medical practices, and accountants operate as partnerships. The partners have unlimited liability for the business’s debts, so if a partnership fails, a creditor can seek to collect what is owed from the partners’ personal funds and belongings. A creditor may pursue collections from one partner before the other one is even told of the action. This form of business is not attractive to people who dislike personal financial risk. Small businesses can relatively easily raise the capital they need to operate because a partnership structure allows a company to gain larger amounts of capital.

The simplest form of business organization is the sole proprietorship, a business owned by one person. An individual may run a service company as a sole proprietorship, for example, or operate a small store. The activities of many one-person enterprises are just as sophisticated as those of some large corporations. The proprietor has unlimited liability for the business’s debts. If a proprietor borrows money, the amount of the loan owed is the organization’s debt and the owner’s personal funds must be used to repay it. Should the proprietor be unable to pay the business’s debts, personal goods and assets may be taken by creditors to pay what is due. The legal costs of setting up a sole proprietorship are usually very small. It is, however, hard to raise large sums of operating capital from external sources, such as loans or stocks. Because the financial resources of a sole proprietorship are limited, so too is the business.

4. 4. The Role of Technology in Business

As data and their management have become increasingly important, businesses have started to make large investments in data and technology. Technology is playing a big part in solving business problems. Think of the frustration and wasted time caused by trying to decipher someone else’s handwriting. Granted, this is not something that the average business would consider a huge problem. However, many of the things that businesses are doing now were not practical only a few years ago.

Using every possible technological tool is standard operating procedure in business today. What’s really intriguing is that businesses’ ability to gather data is outstripping their ability to analyze it. Some businesses even have access to more information than they know how to manage. For decades, the cost of computers has been falling while their power (and the amount of data they can process) has been increasing. One result of this has been that more businesses—especially small ones—are taking advantage of the data revolution.

5. 5. Ethical Considerations in Business Operations

Ethical behavior imposes additional costs on organizations in business activities, and proper guidelines in the area of ethics are, therefore, largely a matter of judgment and eloquence. There are seldom easy, cut-and-dried answers. One way to exercise ethical behavior is when all those who engage in business activities are truly well-informed. Consumers understand all terms involved, competitors know all design plans and make an analysis of the many alternatives available, society’s values are incorporated into all decisions, and all feel free to express their input. Open, competitive, well-informed markets offer a natural mechanism for the wise allocation of resources and underscore the desirability of requiring business activities to be conducted with full regard to costs and benefits to all affected parties. To these ends, some legislative bodies have established minimum standards of ethical behavior that by law must be observed.

It is unfortunate that much of the image problem in business has not been a sufficient basis for thoughtful guidance regarding desirable behavior in business. As a result, various groups prescribe their version of what constitutes ethical behavior by business and the characteristics of suitable business goals. The religious and ethical groups, courts, governmental agencies, and social critics all – in their own ways – decree what are legitimate and what are illegitimate business actions. Therefore, research on corporations and the overriding questions of society’s goals and how to reach those goals becomes of real concern.