The Driving Forces of Business
What enters your mind when you hear the word business? Do you think about IBM? Or do you think about the mom-and-pop grocery stores? Businesses range from small companies to large enterprises. Today's businesses produce most of the goods and services we consume. These same businesses employ most of the working class in the United States and all over the world.
The driving forces of business include the following:
1. Labor
2. Capital
3. Entrepreneurs
4. Physical resources
5. Information resources
Understanding economic systems is key in planning and running a business. There are several types of economic systems including the following:
1. Planned economy, such as communism and socialism, in which individuals contribute according to their abilities and thus receive economic benefits
2. Market economy, which is a mechanism for exchange between buyers and sellers of a particular product or service
3. Mixed market economy, which is a combination of the both planned and market economies
4. Socialistic planned economy, in which the government owns and operates major industries
The success of a company is predicated on how productively it is managed. The basics of planning, organizing, directing, and controlling are taken to a new level when business is international. For example, Wal-Mart started out as a U.S. growth company but then realized the opportunity for foreign expansion. Wal-Mart aggressively opened new stores and purchased existing retail chains, quadrupling its foreign sales to $14 billion between the years of 1995 and 1999.
With international expansion, there are barriers to trade, including
1. Social and cultural differences, such as language, culture, and business formalities. In Japan, it is considered an insult if you are given a business card that you glance at and then place in your pocket.
2. Economic differences. In dealing with mixed economies, the intervention of the government can play a critical role as how business is transacted. For example, the French government is heavily involved with all aspects of air travel and design. This makes dealing with planned economies like China and Vietnam difficult.
3. Legal differences. Many times, an accepted business practice in one country is illegal in another country.
4. Political differences. Governments can place laws and restrictions that can prohibit conducting business altogether.
In the past, many nations protected their domestic businesses. Today, however, countries are realizing the financial benefits of foreign trade and are aggressively encouraging it.