Business Concepts, Functions, and Objectives: A Comprehensive Guide
Business Concepts, Functions, and Objectives
Definition
From an economic perspective, a company is a unit of production of goods and services.
Common Elements
- Objectives: Every company seeks to achieve a specific goal.
- Production Factors: Companies utilize human and material resources to obtain goods and services.
- Organization: Companies organize these factors to achieve their objectives.
- Risk-Taking: Companies take risks due to the uncertainty of final results.
- Value Creation: Companies create or increase the value of the goods they produce.
- Wealth and Employment Generation: Companies generate wealth and create jobs.
- Environment: Companies operate within a specific environment.
Functions
- Purchasing or procurement of raw materials
- Production
- Business or distribution
- Human resources or personnel
- Finance
- Research and development
Objectives
- Profitability (relationship between profits and invested capital)
- Growth and market power
- Stability and adaptability to the environment
- Social responsibility
Business Classifications
According to Size
- Small businesses
- Medium-sized businesses
- Large enterprises
- SMEs (Small and Medium-sized Enterprises)
- Multinationals
Criteria for classification include organizational size, assets, production volume, equity or net assets, profits, and technological level.
According to Economic Sector
- Primary sector businesses
- Secondary sector businesses
- Tertiary sector businesses
According to Area of Activity
- Local
- Provincial
- Regional
- National
- Multinational
According to Legal Form
- Limited Liability Company (LLC)
- Limited Liability Limited Partnership (LLLP)
- Collective
- Cooperative
According to Ownership
- Private
- Public
- Mixed
According to Basic Function
- Producing
- Trading
Company Structures
Public Limited Company (PLC)
- Definition: Legal personality, voluntary association, profit target, minimum capital €60,101.21 divided into equal shares.
- Constitution and Foundation: Notary, Business Register (simultaneously or consecutively).
- Division and Transmission of Social Capital: Free transfer of shares once the company is registered in the Commercial Register.
- Organs: General Meeting of Shareholders and Board of Directors.
Limited Liability Company (LLC)
- Definition: Minimum capital €3,005.06 divided into shares, a corporation with 10 or more partners (legal or natural persons).
- Constitution and Formation: In writing, published in the Mercantile Registry (simultaneously).
- Division and Transmission of Social Capital: Free transfer of shares between members and their relatives.
- Organs: General Meeting and Administrators.
Worker-Owned Companies
- Purpose: Secure jobs for workers, management, and company profits.
- Requirements for Constitution: Public document, majority worker ownership of fixed capital, no more than one-third of the capital held by non-members, special reserve fund of 10%.
- Social Capital and Partners: SLL (Sociedad Laboral Limitada) and SALT (Sociedad Anónima Laboral).
Cooperatives
- Origin and Purpose: Labor movement, variable capital, democratic governance, not-for-profit (surpluses, not profits).
- Formalities for Constitution: Public document and registration in the Cooperative Administrative Record.
- Organs: General Assembly, Board of Governors, Auditors, and Resources Committee.
The Entrepreneur in Economic Thought
Classical economists initially identified the entrepreneur with the contributor of capital, and profit as the reward for capital. In the 19th century, a distinct entrepreneurial function emerged.
Marshall (1890)
Elevated the organizational function to the category of a fourth factor of production.
Theory of the Innovative Entrepreneur (Schumpeter, 1911)
The entrepreneur innovates, applying untapped technological innovations. This creates temporary monopolies and extra profits, driving economic development.
Theory of the Risk-Taking Entrepreneur (Knight, 1921)
The entrepreneur assumes risk in an uncertain world, ensuring income for production factors. Profit is the reward for risk-taking.
Theory of the Entrepreneur as Technostructure (Galbraith, 1967)
In developed economies, large companies are dominated by a technostructure – a group of professionals with specialized knowledge. In smaller businesses, control rests with owners and managers, who focus on growth, efficiency, and maintaining owner confidence.