The Final Cause of Business

PHILOSOPHY OF BUSINESS (MBA 102)

The Final Cause of Business

THE CORPORATE OBJECTIVE(The Final Cause of Business)

George Silandote Jr.



For the acorn is to become an oak tree,what is the final cause of

business?



PROFIT

SERVICE

THE CORPORATE OBJECTIVE



THE SIMPLE END CONCEPTEverything that exist can be reduced to the concept of Act

A Person - Act of Doing

A Thing - Act of Existing

An Event - Act of Happening

An Act - Act of Being



ACT IN RELATION TO THE CONCEPT OF POTENCYNatural Act Human Act

- A process or a movement such as; Action Motion Mutation

- Act of a Person or Agent

- What WAS- What IS- What WILL BE

- Human (a rational being) as doer of the Act.

Every Act tends towards an END.



END = the GOAL= Objective= Purpose= Aim= Intention= Target= etc.

It is what the Agent intends to achieve in pursuing the act, and that is what he is headed for unless something or somebody changes the course of the act along the way.



AN AGENT intends

TO DO

TO ACHIEVE

AN ACT(Agent’s Act)

AN END(Agent’s End)

Naturally tends towards

WHICH ISPURSUED

WHICH ISACHIEVED

EITHER ASEITHER AS


THEINTENDED

ACT

THE INTENDEDCONSEQUENCE

OR AS

OR AS

AMODIFIED

ACT

AMODIFIED

CONSEQUENCE

(Circumstantial Act)

(Circumstantial End)

(Act’s Natural End)


Illustration: THE GOAL CONCEPT



Illustration: THE COMPLEX ACT-END RELATIONSHIP

AGENT

ACT

ULTIMATE END

IMMEDIATE END

INTERMEDIATES

END END END END END

MEDIATE ENDSLong Range Plans

Short and Medium Range Plans



VIEWS ON BUSINESS OBJECTIVE1. The Corporation’s Sole Purpose is PROFIT.Milton Friedman- To make profit is the most socially responsible role for

business. Stockholders are the owners of the corporation hence

corporate profits belong to the stockholders. Corporate managers are mere agents.

Stockholders are entitled to their profit by virtue of a contract between them and the other stakeholders.

If a corporate executive spends money to contribute to the social objective (say of improving the environment), he would be spending the stockholders’ money and reduce their return. In effect, he will also be spending the customers’ money to raising prices.

John Argenti- A company has one and only one permanent

unalterable raison d'être which is to make profit. Other than profit, the company has no reason for existing.

- The objective of the company should satisfy the following conditions; That which the company would never abandon under any

circumstances; That which the company must do in order to survive; and That which if the company fails to attain, the company

would fall as a company



Proving Argenti’s Theory on Profit Argenti’s Theory Proponent

Business Objective The company would never abandon

The company must do in order to survive

If the company fails to attain, it would fall as a company

Increase in Market Share

Increase in Sales Volume

Industry leadership in technology

Increased production

Profit

VIEWS ON BUSINESS OBJECTIVE



Proving Argenti’s Theory on Profit Argenti’s Theory Proponent

Business Objective The company would never abandon

The company must do in order to survive

If the company fails to attain, it would fall as a company

Increase in Market Share

Increase in Sales Volume

Industry leadership in technology

Increased production

Profit

Service

VIEWS ON BUSINESS OBJECTIVE



THE OBJECTIVES OF BUSINESSThe Three (3) Dimensions of Business

As a Fundamental Social Process

As an Industry Function

• Role as a Company (Institution)• Role as a Businessman (Person/Individual)

As a Corporate Activity




• Business is a natural consequence of the need for complementation among men in society.

• Its natural objective is to provide a process to fill in the gap between the needs and what are needed, towards the satisfaction of human needs for the integration of man’s human existence or the total development of the total man.

• “Quality of Life” and “Quality of Society”• Business as “part of the society”

As a Fundamental Social Process




• It is an immediate objective of a Business to provide a venue for business industries to operate. Business as an industry is natural extension of business as a social process. It shares the common objective of providing quality of life and society.

As an Industry Function




• In its Role as a Company• To provide the company Core Service as its immediate

objective.• In its Role as a Businessman

• To provide his personal service as his immediate objective by utilizing the company’s core service to create or generate customer satisfaction which is his intermediate end, in order to earn profit which is his ultimate end.

As a Corporate Activity




Business Dimensions

Immediate Objective

Intermediate Objective

Ultimate Objective

Remote Objective

As a Social Process

To provide a process

Quality of Life and Society Man

As an Industry To provide a Venue/Arena


The Corporate Entity (Company)

To provide Company Core Service

Human Needs satisfaction


The Businessman

To provide Personal Core Service

Customer Satisfaction Profit Man



THE OBJECTIVES OF BUSINESS- On the Corporate Level of business,

The company’s business activity produces or provides the Service.

The businessman utilizes the business activity as the means (immediate end) to earn his Profit.

- However, in their operations, the businessman and his business activities are closely interlinked and one cannot operate without the other. What the businessman does is a business activity and anything performed by the business activity is attributed to and caused by the businessman. This is referred to as the Corporate Acitivty.



THE OBJECTIVES OF BUSINESS- Therefore, in the hierarchy of ends involved in the corporate

activity, two ends stands out;

Immediate End - Service Ultimate End - Profit

- There is mutuality of cause and effect relationship between the two. Service is an operating ultimate end which addresses the mediate ends of

human/customer needs satisfaction and the quality of life and of society. Profit is an ultimate end, although for the businessman it is his immediate

objective, it is the motivating ultimate end.



THE PROFIT ORIENTATION

Concepts of ProfitProfit as a CAUSE Profit as an EFFECT

Profit is a motivating ultimate end of objective of the businessman. It causes the businessman to go into business.

Profit is what the businessman derives from the business and serves as his reward for good performance. It is what the businessman expects to gain from his business act or undertaking, what he looks forward to, that is, the subsequent bigger rewards for subsequent better performance.

It serves as a standard against which the operational efforts or performance of the businessman is measured.It is the measure of how well the businessman can undertake the other objectives of his business.




The Profit Motive- Refers to the corporate objective of engaging in economic activities in order to

earn profit, an assumption based on the general assertion that in a free enterprise economy, all business undertakings are profit oriented. Then, profit orientation was often identified with greed and opportunism.

- Albeit the indignities slapped profit motive, there are factors in the judgment of profit – intentions and processes, that is, how the profit is earned and how it is applied. In other words, the issue on profit orientation looks at how profit is treated.




The Profit MotiveThe Two Types of Profit Orientation

- Profit Maximization is the traditional standard in extreme capitalistic systems which is also called the profit ethic. “Whatever the businessman does for himself is something good

that is done for society.”




The Profit MotiveThe Two Types of Profit Orientation

- Profit Sublimation To apply profit not only for wealth accumulation but for the business objective

with a social orientation. It means profitability with a social commitment. The businessman, in order to strike a balance between (1) The need to

maximize Profit and (2) The need to satisfy the interest groups, had to settle for a profit level less than the maximum but sufficient to satisfy the company’s other objectives. This is called “Profit Satisficers”



Profit PerspectivesThe Two Views on Profit Perspective

- Profit Out of Greed As an excessive gain, profit is oppressive. It is associated with the ugly

concept of profiteering. It is not money or profit which is evil, but how it is acquired and how it is

used.

- Profit Out of Need The reasonable excess of income over cost, the reasonable difference

between what it costs to produce and sell the product and the revenue from its sale.

The residual which is left after all production and selling costs have been deducted from the revenue derived, and after considering all relevant factors.




Service as Orientation of Business- As a Commodity- As an Objective

Service on the Social Process Level Service on the Industry Level Service on the Corporate Level

THE SERVICE CONCEPT



Service on the Social Process Levelo The objective of the business on its basic concept level, that

is, business as a fundamental social process. It is a natural process inherent in the very nature of society designed by nature to bridge the gap between what men produce for mutual exchange and the mutual needs.

THE SERVICE CONCEPT



Service on the Industry Levelo As the venue for the production and distribution of goods and

services, business on the industrial level provides the functional arena in which the social process of business is given expression.

o The production function and the distribution function are natural component of the exchange process.

THE SERVICE CONCEPT



Service on the Corporate Levelo Core Service – service as an essential business function

consists in those services which are essential to the business concept itself, without which business on the corporate level is impossible.

i. Company Core Service – corporate or company core service is the purpose for which a company was established.

ii. Product Core Service – what a product is intended for, or what a product is expected to do or provide.

iii. Personal Core Service – refers to the functional service of a person, that is, the service he renders according to his function in the business organization

THE SERVICE CONCEPT



THE SERVICE CONCEPT Marginal Service – Services which are not inherent in the

company or in the product or in the service providers (not in the essence of the company’s subject).

o Company Extended Service – additional services a company provides in the sales of its products partaking the nature of sales promotions.

o Product Extended Service – extra attributes or extra functions incorporated into a product for better convenience of the consumer.

o Personal Extended Service – the businessman, his salesman and his personnel force are involved in personal services in support of the company or product augmentation.



THE SERVICE CONCEPT Social Responsibility Service – “the social responsibility of business

is to increase its profits” is a direct social responsibility to the stockholders. There are other direct and indirect social responsibilities which are contained in law and ethical customs.

1. Social Responsibility is inherent in the imperatives of product quality which both the law and ethical customs demand. There are provision in the constitution that pertains to consumer protection in terms of adequate product quality that will safeguard the safety of the consumers.

2. Social Responsibility is the underlying philosophy in environmental conservation and protection, which posits a direct and mutual relationship between business business and its environment: A favorable business attitude is conducive to environmental conservation; and a favorable environment is conducive to business success.



THE SERVICE CONCEPT Social Responsibility Service – “the social responsibility of business

is to increase its profits” is a direct social responsibility to the stockholders. There are other direct and indirect social responsibilities which are contained in law and ethical customs.

3. Social Responsibility serves in promoting a good image for the company that is committed to it.



THE PROFITABLE SERVICEThe Corporate Objective

Business Provides Service to Generate Profit. Business Makes Profit by Providing Service.

The relationship between Profit and Service is one of alternating cause and effect in a circular motion, or in a spiral progression.

This, we may also call, The Service-Profit Interlink



SERVICE

Illustration: The Service-Profit Interlink

PROFIT

generates

motivates




The Service-Profit Interlink

• Service and profit are cause and effect to each other – service is an effect of profit, is an effect of service, is an effect of profit.

• As business continues in its operations, and as profit increases, service improves, and profit increases in turn to cause the service to improve…



PROFIT

SERVICE




PROFITABLE SERVICE





Profitable Service: The Ultimate

• Profit is important to a business, that cannot be denied. It is necessary for and indispensable nourishment of a business enabling it to survive, operate and grow.

• As a motivation for the company to provide its service, it must earn profit, in the same way that while the principal objective of a product is the provision of its service.




The Relationship of Precedence

• In terms of Operation, SERVICE is the objective.• In terms of Motivation, PROFIT is the objective.

• Service is the Objective of the COMPANY.• Profit is the Objective of the BUSINESSMAN.



END OF REPORT