is a clear and lofty sense of why a business exists. course hero

Who said that businesses exist to fulfill a specific social purpose and to satisfy a specific need of a society?

Peter Drucker. Peter Drucker, perhaps one of the best management thinkers of all time, said that businesses exist to fulfill a specific social purpose and to satisfy a specific need of a society. However, a lot of business owners think of organizations only from a capitalist mindset. Now, that isn’t bad nor wrong by itself.

What is the first thing you learn about economics?

One of the most first things you learn in economics is the concept of supply and demand. The easiest way to grasp this concept is through the circular flow of income.

What happens if you don't add value to your business?

If you don’t, then over the long-run, your customers will no longer find value in the products/services that you offer and eventually leave.

How are customers created?

Customers are created when they find value in the product and/or service of the organization. What this means is they find something of value to them that they are willing to spend money in exchange for it. At this point, when a customer pays for a product or service, a sale or revenue is created.

Why is it important for a business to create customers?

Because a business cannot exist outside of society and must satisfy a specific need in order to stay in business, it has to create or add additional value to the community or individuals. That’s why the real purpose of a business is to create customers.

What is business enterprise?

Business enterprises … are organs of society. They do not exist for their own sake, but to fulfill a specific social purpose and to satisfy a specific need of a society, a community, or individuals.”

When does the market cease to exist?

The market will cease to exist if value is not created for both parties. And when the value you provide is less than the cost, the business earns a profit.