Understanding the Enterprise: Concepts, Elements, and Social Responsibility
The Concept of Enterprise
A company is an organization that buys and transforms factors to produce goods and services in the market.
The Company and Production
The aim of the company has been meeting consumer needs by producing goods and services. The economic system solves basic economic problems.
Relationship Between Firms and Households
Production and consumption are two key activities in which exchange relationships exist between firms and households.
The Circular Flow of Income
It represents the functioning of an economy and is the sum of the value of all final goods and services produced.
Elements of the Company
Heritage
A set of rights, goods, and services.
Material Elements
Financial assets of the business can be current assets and non-current assets.
Immaterial Elements
They are applications that give rise to intangible assets.
Financial Resources
Sets of rights and obligations.
Human Element
- Workers: Work for others
- Entrepreneur: Coordinates, manages, and directs
- Proprietary: Provides capital
- External Groups
Organization
How the assets of the company are arranged to achieve business goals.
The workings of the company are based on three factors: common purpose, relationship, and combination systems of people and resources.
General and Specific Environments
General Environment
These are factors outside the company that affect its performance and include aspects such as legislation or technology. They may include economic, technological, political-legal, and social factors.
Specific Environments
Consists of a set of factors that influence a particular group of companies. Among the factors include the following: customers, suppliers, and financial institutions.
Functional Areas and Business Objectives
Company’s Functional Areas
Include functional resources, productivity, trade, planning, and strategy.
Objectives of the Company
The primary objective of the company is to maximize profits.
- Objectives: To meet consumer demand, profit maximization.
- Ancillary Benefits: Profitability, growth, environmental responsibility.
The Social Responsibility of a Company
Private Costs and Social Costs
Private costs are those that indicate only the company’s expenses.
Externality
A private action arises when a firm has external effects affecting other businesses. Can be positive or negative.
Social Cost
Social Responsibility
Tools for Social Responsibility
Codes of Ethics
A set of rules of conduct to govern behavior.
The Social Balance
Brings together quantitative and qualitative information to evaluate the company. The balance has the following aspects: social partners, business management, subjective indicators.
Theories About the Company
The Capitalist Entrepreneur
As classical and neoclassical economists see it, there are two important economists:
- Marx: Sweatshops
- Marshall: Speaks of 4 factors of production
The Employer and the Risk
Frank H. Knight: The main task of the entrepreneur is to ensure the income of production factors supporting the risk and profit.
The Innovative Entrepreneur
Joseph A. Schumpeter: The entrepreneur is the central thrust of capitalist economic development, gets temporarily and allows the firm to earn a profit.
Separation Between Property and Control
Galbraith: Large business organizations are not managed by a single person.