Understanding the Business Enterprise: Structure, Elements, and Environment
Concept of a Company
A company can be understood through several lenses:
The Firm as an Economic Unit of Production: Based on the theory of production economy, a company transforms inputs into outputs. It is the basic productive unit of the economy, as opposed to the family, which is a unit of consumption.
The Company as an Organization: The theory of organization and administration conceives the company as a particular kind of organization or human association. It is composed of a set of diverse factors that interact under the direction and supervision of the employer.
The Company as a System: A company is an open system because it interacts with its environment. It obtains inputs and produces outputs. It is a complex system that can be divided into two levels:
Operating System: Where basic economic factors operate.
Decision System: Surrounds the former and serves the fifth factor of production, “the entrepreneur.”
The Business Environment
The business environment consists of a wide range of factors that are beyond the company’s boundaries but are sources of opportunities and threats, impacting its results. It can be categorized as:
General Environment: The set of factors affecting all businesses in a given society.
Specific Environment: Composed of elements to which the company is linked by virtue of its activity, including customers, distributors, and suppliers.
The Elements of a Company
A company comprises a diverse set of factors, ordered to carry out an economic activity. These elements can be classified into the following categories:
Financial Capital or Financial Resources
Technical Capital:
Tangible: Fixed capital investment (capital goods and technology), circulating equity investments (merchandise, raw materials, etc.).
Intangible: Technology.
Intellectual Capital: This comprises a set of different elements that give the company value, capacity, and potential beyond the sum of its assets and personnel. Leadership, innovation, quality, and image are elements not valued in accounting but create value and enable the organization to meet environmental challenges. Within intellectual capital are:
Human Capital: Refers to the useful knowledge for companies that people in the workforce possess.
Structural Capital: The systematic knowledge made explicit by the organization.
Relational Capital: The value to a company of all its relations with the environment.
Active Factors: These factors manage the other factors. Within them, we can identify groups differentiated by their interests, roles, and relationships with the company:
Owners of the Capital or Partners: In the case of a society.
Employees or Workers: People who provide their work in exchange for a salary, with liability extending only to their work.
Managers and Administrators: People who run the company and make decisions to achieve goals, thus bearing maximum responsibility.