Any economic buffs around?

[Disposable Hero]

Hi,

I am doing a crash-course in sales-and accountmanagement and for the grand finale I have to turn in an exam paper.

In it I state that the purpose (or mission) of a commercial company is to generate profit.
The other students all disagree and state that the purpose is to fullfil customer's wants and needs etc, but I think that that is a means to a way.

Any thought, if you please?

[canberraguy]

You are correct to a point. Companies are usually set up to create money or a job for the owner. The successful ones find a hole in the market and fill it. That may be with good service, Low prices, new product etc. The additional jobs etc they generate are a by product of that. However, like any uni course, take into account the views of the person that will mark it. if the lecturer does not agree you will not get marked too well.

[Disposable Hero]

Thanks, I will take that into account, but man, it rattles my chain.

They say that, for example, they sell holes, not drills. In other words, they sell solutions.
I asked them how long they will be supplying solutions when teh moolah runs out.

[ctsteel]

If you liken a company/organisation to an organism (think of it as a living entity where the employees/owner are its appendages), its main drive/function is to stay alive, and then grow/reproduce. So primarily it will be driven to make enough money to pay debts and salaries etc, and ultimately it will desire growth in the form of new products/employees/markets/branch offices etc. So the need to stay 'alive' means it has to at least break even and then beyond that it needs to make profit to be able to increase its size/lifespan etc.

That's the raw organism nature of the company - where that 'primal' need is tempered is by its appendages that make it happen - so the owner of a small company for example might be not interested in expanding because it's too much effort for him personally, or he is happy to let the company fold when he retires etc - those are limitations imposed by the 'appendages' rather than the 'company' itself. You tend to see this behaviour (I feel) in large corporations with shares and boards, because the personal needs/wants of individual appendages (directors, shareholders etc) are miniscule and insufficient to drive the rest of the organism and its overall trends (share buy/sell trends, the board's directive to make profit to keep shareholders happy etc). So the company in that case has become more of a self-sustaining living organism that has been able to free itself from the restrictions of its appendages, and can continue to function/grow/reproduce in spite of changes to portions of its body.

Sounds a bit esoteric I know, and I'm not even an armchair economist so perhaps it's a bit of an odd comparison but it's something I've had bouncing around in my head for a while - I can visualise these really large corporations as essentially a new form of life that has a parasitic existence on us/society, where they have grown in stature to the point where they utilise individuals and groups of people as organs and food sources, and we are not in control of it as such and it has the ability to survive beyond our control. Not sure if I've fully encompassed that thought in words here.

[Disposable Hero]

It makes perfect sense to me, thanks. I can even apply that train of thought to the company I now work for.

2 CEO's, the market asking us to expand and then we hit the end of the management skills of these appendages. This causess huge amounts of stress in the rest of the organism, I can assure you.

So thanks again, economists from the land down under!

[ctsteel]

I'm sure a lot of CEOs can be regarded as appendages of one kind or another

[Bloodknight]

The other students all disagree and state that the purpose is to fullfil customer's wants and needs etc

Boy, are those guys going to be disillusioned ^^.

[emperorpenguin]

I'm studying this at the moment. Sounds to me that those guys are confusing "Mission Statement" with both "Objectives" and the very basic reason anyone sets up a business ie to make money.

[Steam_Giant]

The Chartered Institute of Marketing define "marketing" as: "the identification, anticipation, and satisfaction of consumer wants and needs profitably"

Consider this as a middle ground between yourself and your peers. However marketing is only a function of business.

I have learned an organisation's purpose can be different at different times, dependant on the company's strategy, some of these include:

Build awareness (heavy use of marketing to launch new product/ market)
Build market share (using price penetration strategies to take business away from competition)
Grow company (M&A's, hostile takeovers, Joint ventures or attracting the best staff away from competition)
Generate Profit (keep owners and shareholders happy)

[Disposable Hero]

Hmm..thanks guys, it is much clearer now. I think I will stick to my plan and keep studying Cultural Sciences at the Open University.

I do this as an escape plan from corporate life..

[Tresidentevil]

Hi,

I am doing a crash-course in sales-and accountmanagement and for the grand finale I have to turn in an exam paper.

In it I state that the purpose (or mission) of a commercial company is to generate profit.
The other students all disagree and state that the purpose is to fullfil customer's wants and needs etc, but I think that that is a means to a way.

Any thought, if you please?

Generally most companies aim to generate a profit. Not all though, think about not for profit organisations. A company doesn't exist to fulfil a customers needs and wants, it is as you say a means to an end. If my company made my customers happy but generated 0 profit what would be the point?

[Disposable Hero]

Exactly my point.

But I altered my final paper so that it is exactly like the 29 others in that class. At least it will get me that diploma to put on my CV.

[ctsteel]

Not For Profits can still need to make money, as the money provides for growth for the company - if you have surplus money you can re-invest it in improving the company, hiring new employees, adjustments to salary etc. Just because it's NFP doesn't mean it doesn't want to sustain positive growth/income etc.

[El_Machinae]

The 'point' of a company is not 'to make money'. It is 'to create what the investors desire'. The seed money put up by the venture capitalists is put up for a reason. Often, this can be as a return-on-investment, but it doesn't need to be. It can also be a shell company, to create tax loopholes. It can be an intermediary, to insulate from lawsuits. etc.

[Bombot]

The OP did say "commercial company"

EDIT - On second thought, I expect there are subsidiaries selling goods to consumers that aren't necessarily aiming to generate profit (for tax reasons).

[El_Machinae]

The question is a bit like "I said that the point of marriage was to form a lifelong loving commitment. They said it was 'to make babies'."

Both are potential 'points' of marriage, but there're many, many other reasons to get married: to get an inheritance, hide your homosexuality, immigration, placate the parents, or social pressure so that unexpected babies aren't born out of wedlock.