In Light of Stakeholders, Ethics, Sustainability, Globalisation, and the Current Economic Downturn, Examine How the Nature and Purposes of Business Firms Is Changing and Express Your View of What Purposes Business
In normal times, examining the changing nature and purpose of business firms would be a very challenging assignment, but we are not living in normal times. As well as all the usual topics globalisation, sustainability, ethics and stakeholders, there is a need to assess the impact of the recent global recession on the nature and purpose of business firms.
As business has moved from bartering rabbit skins for sacks of potatoes, to electronic trading of mortgage back securities, the purpose of business remains the same: to fulfil the needs and wants of individuals and this boils down to creating wealth. As John Roberts wrote in The Modern Firm, “Firms exist to coordinate and motivate people’s economic activity.” (2004, p. 74) This suggests that the purpose of business is to generate wealth.
Current discussion in the aftermath of the 2008 credit crunch and the government bailouts of modern firms, centers on the assignment question, too. A recent statement from an editor of the Economist puts things in perspective,
“Though it is possible for firms to increase their profits in the short run by doing things that hurt society, long term profit maximization for business as a whole requires that companies operate sustainably and give back to society...for too long capitalism’s supporters have been content to agree with its opponents that it is a system built solely on greed. The road straight ahead involves preserving the much that is good in capitalism while finding ways to make it work better.”
Matthew Bishop, U.S Business Editor, The Economist cited in Under the Buttonwood Tree blog, Edelman, R. October 2009.
While the purpose remains constant, to a certain extent, but with an ever changing business environment the way a company achieves its purpose is also ever changing and this defines the nature of the firm. The spirit in which a business firm approaches these changes determines the business’s character and nature. The values and morals that
As business has moved from bartering rabbit skins for sacks of potatoes, to electronic trading of mortgage back securities, the purpose of business remains the same: to fulfil the needs and wants of individuals and this boils down to creating wealth. As John Roberts wrote in The Modern Firm, “Firms exist to coordinate and motivate people’s economic activity.” (2004, p. 74) This suggests that the purpose of business is to generate wealth.
Current discussion in the aftermath of the 2008 credit crunch and the government bailouts of modern firms, centers on the assignment question, too. A recent statement from an editor of the Economist puts things in perspective,
“Though it is possible for firms to increase their profits in the short run by doing things that hurt society, long term profit maximization for business as a whole requires that companies operate sustainably and give back to society...for too long capitalism’s supporters have been content to agree with its opponents that it is a system built solely on greed. The road straight ahead involves preserving the much that is good in capitalism while finding ways to make it work better.”
Matthew Bishop, U.S Business Editor, The Economist cited in Under the Buttonwood Tree blog, Edelman, R. October 2009.
While the purpose remains constant, to a certain extent, but with an ever changing business environment the way a company achieves its purpose is also ever changing and this defines the nature of the firm. The spirit in which a business firm approaches these changes determines the business’s character and nature. The values and morals that