Evolution and Elements of a Company: Structure, Function, and System
1. Evolution of the Company
- Primitive Unit: Simple, basic family unit technique
- Feudalism
- Single Commercial Unit: Organized, family-based or non-technical economic unit
- Commercialism (mercantile capitalism)
- Industrial Unit: Complex, organized, corporate, and functional economic unit of production
- Industrial capitalism
- Complex Organization Unit: Organized, multi-societal, divisional, and multi-unit decision or direction
- Capitalism and international finance
* Primary transformation of traditional production factors, easy organization.
** Production structure, but new forms of corporate business and new organizational approaches to achieving business goals.
*** Characterized by SA and even groups of companies and their performance on a functional basis.
**** Significant financial growth. This is the most important achievement of financial surpluses for large industrial companies. Breach between ownership and management and the appearance of the phenomena of concentration and internationalization of capital; financial or business unit as a unit of direction.
2. The Company as a Living Entity
A company is a living being: it is born, grows, dies, and transforms. It is forced to adapt to its environment, which can play a major role as an agent or intermediary. The word “company” comes from the Latin word apprehendere: to undertake a job that involves or presents difficulties, as does the enterprising entrepreneur. If economics studies the efficient allocation of scarce resources, then the company is regarded as an agent that efficiently organizes economic factors to produce goods and services to market with the aim of reaching certain objectives. We need to distinguish business concepts such as a company, an operating plant, or an industrial establishment. The first is a legal dimension, the second is a manifestation of the technical aspect, and the third is a spatial or geographic location.
2.1. The Company’s Role as an Economic Agent
Basic Structure Definition Stage:
- Company: Primitive unit, simple economic model of organization, basic family unit technique
- Feudalism
- Enterprise/Business Unit: Simple, organized, family-based or non-technical economic unit
- Commercialism (mercantile capitalism)
- Successful Industrial Unit: Complex, organized, corporate, and functional unit of economic production
- Industrial capitalism
- Business Unit Organization: Complex, organized multi-societal, divisional, and multinational unit decision or direction
- International financial capitalism
Two of the main reasons that justify the emergence of corporations in the market economy system are the existence of market costs (Coase) and the risk or uncertainty of the system (Knight).
2.2. Business Functions
- Organizes, coordinates, and directs the production process, allocating resources, conducting transactions, and establishing relationships between agents and economic discounts.
- Anticipates national product, generating cash income.
- Assumes and reduces the costs of market information.
- Assumes the risk of the enterprise.
- Develops its own economic system, creating wealth (goods and services) and employment.
2.3. Elements of the Company
Organization = Employer = K + FBK
Passive factors / Factors / Human capital / Assets = Liabilities
Classical economic resources (land and capital):
- Financial capital or financial resources.
- Technical liquids (Gross capital formation/investment)
- Tangible
- Investment techniques or equipment and IT.
- Materials and merchandise.
- Intangible
- Technology factors and software assets.
- Tangible
Classic concept of the modern workforce and human capital. They can differentiate groups of people according to interests, role, and relations with the company:
- Owners: Stake in the company, mood control
- With simple financial investments.
- Employees or workers.
- Managers or administrators.
Third factor: Organization: Set of relations of authority, hierarchy, coordination, and communication between active and passive factors.
Edvinsson and Malone use Intellectual Capital to represent the total value of intangible assets owned by the company at a given moment, which is not properly accounted for in the annual accounts. It is based on knowledge assets and set out in people (human capital: skills, talent, and experience), organization and technology (structural capital: organization), and the relations with the environment or their agents (relational capital: relationships).
3. The Company as a Complex System
a) The company is a technical system consisting of a set of processes, technologies, and methods, explaining the business and operations that characterize the organization that financially develops one or more plants or establishments and through one or more mercantile companies.
b) The company is a social system composed of a group of persons acting with different roles, interests, and objectives, but with a relationship of interdependence linked to a given structure and common direction.
c) The company is an open system in constant relationship with its environment. Interaction with the outside occurs through the market and the agents that make up the remaining economic system in which it develops its activity.
3.1. System Characteristics
- Technical: Multiprocessing Technology
- Field of Activity: Multiproduct… Differentiation/Diversification-Multimarket… Segmentation
- Spatial Structure: Multidivisional Location, Multiplant… Business/Areas/Functions-Multisocietal Group… Corporations
- Behavior: Multi-objective… Objective System (corporate)/Single-Multidecisional Objectives… Decentralization
- Power: Multicontrol… Spatial location